New HMRC IR35 guidance

Matt Fryer, Head of Legal Services at Brookson Legal, the only Solicitors Regulation Authority regulated IR35 specialist law firm, comments on the HMRC briefing: supporting organisations to comply with changes to the off-payroll working rules (IR35)

“If you have taken short cuts in the hope that HMRC will be lenient in the short term, then now is the time to rethink that decision and ensure you make improvements prior to 6 April.

HMRC’s latest IR35 guidance is a welcome offer of support for companies that make genuine mistakes with the new legislation over the next 12 months. However, it also comes with a clear warning that HMRC will be actively monitoring to identify and correct non-compliance with the off-payroll working rules with a specialist team.

Whilst penalties may be waived for businesses that correct accidental mistakes, any tax which is discovered to be owed by companies and agencies that have failed to demonstrate reasonable care will still be recovered through these corrections. For this reason, we would caution businesses against cutting corners to meet the April 6 deadline and simply pushing this financial risk into the future.

It is also clear that HMC will take a very dim view of ‘deliberate defaulters’ – a category that includes tax avoidance schemes posing as umbrella companies. The guidance emphasises that it is now the responsibility of all medium and large-sized organisations to correctly asses a contractor’s tax status, so it is important that you have sight of this risk throughout the supply chain rather than just passing the buck to your outsourcing partners.

The clock is ticking, but it is not yet too late to manage this change adequately.”

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