The 'compliance principles' outline ways the tax office intends to ensure rapidly approaching IR35 reform in the private sector is implemented compliantly by businesses.
They intend to show a softly, softly approach of helpful co-operation rather than one of rigid enforcement. There have previously been calls to delay the introduction of these new regulations given the upheaval within the sector at the present time due to the pandemic.
HMRC says that these principles will underpin the way we support you to comply, and how we will intervene where we suspect non-compliance:
- we will support customers who are trying to do the right thing and comply with the rules
- we will help customers meet their responsibilities under the off-payroll working rules
- where customers make a mistake, we will help them correct it
- we will check that mistakes are corrected
- we will identify and correct non-compliance with the off-payroll working rules
- we will challenge deliberately non-compliant customers
- we will challenge tax avoidance schemes that claim to avoid the off-payroll working rules or otherwise reduce the tax payable
- we will use a specialist team to carry out all our off-payroll working compliance activity.
Qdos- 'Red herring'
However, tax specialists Qdos were less than impressed citing the on-going promotion of what it saw as the 'fundamentally flawed' IR35 status evaluation tool.
Seb Maley from tax speciailists Qdos said: “On one hand HMRC are exploring new ways to ensure compliance, on the other they continue to promote the fundamentally flawed IR35 tool, CEST, which threatens compliance. The irony hasn’t been lost on me, nor will it have been on many others.
“HMRC insists a ‘light touch’ will be taken with regards to IR35 compliance when the reform lands on April 6, but this is a red herring. Businesses won’t face penalties in the first year, but if a firm makes an incorrect IR35 decision or fails to meet its legal obligations, the tax office will still demand outstanding tax owed - and tax liability dwarfs penalties.
“Big promises have been made to clamp down on businesses that deliberately abuse the rules. But I have my doubts as to whether HMRC will actually deliver on these, and put a stop to firms that blanket place contractors inside IR35. After all, no action was taken in the public sector following the roll out of similar changes in 2017.
“On the face of it, that HMRC wants to help businesses get things right is a good thing, but the tax office needs to get its own house in order first. CEST is unreliable and HMRC have a dismal record in IR35 tribunals.
“With reform closing in, HMRC’s compliance principles mustn’t distract businesses from preparing and doing everything in their power to make sure these changes are managed in a compliant manner.”
The HMRC briefing document: Supporting organisations to comply with changes to the off-payroll working rules (IR35)
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2021