Wednesday's silence, within the Budget, on another postponement of the Off-Payroll working rules puts an end to discussion on further delay or a U-turn on the IR35 changes which are coming into effect on 6 April 2021.
As such businesses should be urgently reviewing the impact the legislation will have on their business and particularly their use of contractors. HMRC’s recent guidance focuses on their approach to compliance, in the first year, being supportive and ‘light touch’ regarding penalties.
HMRC are committing to a light touch approach with respect to penalties in the first year where mistakes are bona fide. In the briefing there is a clear message of support set out through the compliance principles. However, this light touch approach should not drive complacency nor lull businesses into a false sense of security with respect to IR35. During the first year, businesses are fully expected to comply with the IR35 requirements but will not be penalised for genuine mistakes. Alongside the supportive message set out by HMRC is that HMRC fully expects businesses to take responsibility to comply and determine if the off-payroll working rules are applicable but will support them through webinars, workshops or one-to-one advice.
Whilst it is encouraging that HMRC are taking a collaborative approach to compliance in the first year to assist businesses in implementing the legislation correctly, businesses should not view this help and lighter touch with respect to penalties as an opportunity to push compliance into the long grass. HMRC have made it clear that they will not tolerate deliberate non-compliance and there is a clear expectation from HMRC that businesses take reasonable care to apply off-payroll working rules.
HMRC have made it clear that they may contact businesses which operate within specific sectors where there is a high usage of personal service companies to discuss the changes and ask for information to confirm compliance.
Businesses should therefore take steps imminently to ensure that they are prepared by the time the changes are implemented in April 2021. The team at Brabners can help you take the necessary steps to ensure your business is IR35 compliant and work with you with respect to any communication and dealings with HMRC.
For more information on the topic, please contact Simon Whitehead.
