HMRC has published new information regarding the implementation of IR35 rules in the private sector from April 6th. The new publication confirms that, while the rules will indeed become mandatory, businesses that make genuine errors within the first year will not be penalised.
Any IR35 mistakes made in the first 12 months will not be penalised, HMRC said, providing the company in question “took reasonable care to apply the off-payroll working rules correctly but still made a mistake, including making mistakes in status determinations.”
HMRC has, however, clarified that this will not apply in the case of “deliberate non-compliance” and that any outstanding tax owed will still need to be paid. Moreover, wilful non-compliance will reportedly result in companies being publicly named, in order to encourage compliance.
The Treasury said: “Customers will not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, regardless of when the inaccuracies are identified, unless there’s evidence of deliberate non-compliance.”
If contractors are found to be involved in deliberate non-compliance, for example via tax avoidance schemes presenting themselves as umbrella companies, they will also be subject to HMRC intervention.
The government has emphasised its desire to help businesses that are eager to comply with IR35 in applying the new rules and will encourage them to “self correct” any mistakes prior to making an intervention. HMRC said it would “provide support based on our view of the employment status indicators and give advice on best practice to help you fulfil your obligations”.
HMRC also stated its commitment to “not use information acquired as a result of the changes to the off-payroll working rules to open a new compliance enquiry into returns for tax years before 2021 to 2022, unless there is reason to suspect fraud or criminal behaviour.”
