How can we help?


HRMC briefing on how to avoid IR35 penalties

On 15 February 2021 HMRC published its policy paper explaining how it intends to help and support organisations which must comply with changes to the off-payroll working rules (IR35) and avoid IR35 penalties. The IR35 rules will apply to all medium and large sized businesses in the private sector with a UK connection from 6 April 2021.  The policy paper sets out HMRC’s compliance principles and when HMRC is likely to investigate suspected tax avoidance. It contains examples and helpful links to further HMRC guidance.

HMRC clearly recognises the complexities faced by organisations now having to prepare for  IR35 rules.  It promises to help “customers trying to do the right thing” and work with those who make genuine mistakes about the employment status of the individuals they contract with through personal service companies. HMRC has reiterated its pledge that in the first 12 months it will not impose any penalties for inaccurate status determination statements, providing  that ‘all reasonable care’ has been taken.  This penalties exemption will not apply where there is deliberate non-compliance or fraud.

While this supportive compliance regime is to be welcomed businesses should not be complacent. Genuine mistakes will not be penalised but they may not be forgotten either. If HMRC identifies mistakes in the way a business has applied the off-payroll working rules HMRC will expect it to ‘self-correct’. And HMRC may do follow-up checks by reviewing available data such PAYE Real Time Information (RTI).

If a business agrees to correct a mistake by changing a contractor’s status determination, HMRC may check that tax and NICs have been accounted for. If a business agrees to update the client-led status disagreement processes, HMRC may contact them to check that the new process meets the requirements of the legislation.

HMRC says that it will (as opposed to may) follow up business to confirm they become compliant and pay taxes that are due if they identify that the business:

  • Didn’t take the opportunity to correct mistakes
  • Are continuing to make mistakes
  • Are making new mistakes

HMRC says that it will (as opposed to may) follow up business to confirm they become compliant and pay taxes that are due

Read the full policy paper HMRC issue briefing: supporting organisations to comply with changes to the off-payroll working rules (IR35) – GOV.UK

If you would like further assistance on the many challenging issues around IR35, please contact us on 0118 958 5321 or email our employment team.

About this article

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

  • 22 September 2023
  • Employment

Talking Employment Law: New family friendly rights

In this first podcast in the ‘Talking Employment Law’ series, Lucy Densham Brown and Rebecca Dowle, members of the employment team summarise some of the big new family-friendly Bills that are working their way through parliament.

  • 20 September 2023
  • Commercial Real Estate

Commercial buyers beware of residential Stamp Duty Land Tax

This article discusses a recent case in which a property buyer calculated the Stamp Duty Land Tax due on the purchase at a lower rate, due to the mixed-use purpose of the property.

  • 19 September 2023
  • Privacy and Data Protection

Organisations’ use of social media: Data protection

Social media applications (or commonly known as ‘apps’) are being developed all the time and we are constantly being introduced to new social media platforms, some of which take almost no time to gain huge popularity.

  • 14 September 2023
  • Immigration

Entrepreneurial Dreams: What is the Innovator Founder Visa?

In an era defined by innovation and entrepreneurship, the United Kingdom has made a substantial effort towards fostering its reputation as a global hub for start-ups and innovators. The introduction of the UK’s ‘Innovator Founder’ route has marked a pivotal moment in the country’s immigration policy.

  • 11 September 2023
  • Corporate and M&A

Changes to the tax treatment of Employee Ownership Trusts

The government published a consultation on 18 July 2023 seeking the public’s views on its proposals to reform the tax treatment of Employee Ownership Trusts and Employee Benefit Trusts. Parties are invited to express their opinions via email via the government website until the consultation closes on 25 September 2023.

  • 08 September 2023
  • Immigration

Navigating the Latest Immigration Rules for Overstayers in the UK: A Comprehensive Guide for 2023

Staying beyond the expiration of your UK visa is a serious matter that, in most cases, can result in significant and long-lasting repercussions.