HMRC has begun formal checks with several companies in the financial services and oil and gas sectors to confirm compliance with the revised IR35 regulations.
This assessment is the result of “engagement model changes” that have emerged within these sectors that are known to be heavily dependent on personal services and contractors.
“Therefore, we first contact customer organizations in these sectors to make sure they are applying the off-payroll working rules correctly,” said an HMRC spokeswoman. .. Computer Weekly..
A change to the Off-Payroll Working (OPW) Regulation, commonly known as IR35, will come into effect on April 6, 2021 and will allow medium and large private and public sector organizations to determine the employment status of their contractors. I will take responsibility. Tax purpose. In other words, the organization now needs to decide whether to tax the contractor it uses as an unpaid worker or as a full-time employee.
Earlier IR35 regulations, which came into force for nearly 20 years, allowed contractors to self-report their tax obligations. That is, should they be taxed in the same way as office workers or as unpaid employees?
HM Revenue and Customs believed that the system could be abused because contractors could deliberately misclassify labor agreements with their employers and reduce their tax obligations.
Last week, the Association of Chartered Certified Accountants (ICAEW) reported that HMRC had begun sending letters. [pdf] We are asking companies in specific sectors for information on IR35 compliance procedures.
The letter asks recipients to arrange a formal meeting with HMRC staff to discuss how the company implemented the revised IR35 rules. We are trying to gain a deeper understanding of the organization’s process for involving contractors and how they decide whether IR35 applies.
HMRC has previously stated that it will not punish employers for IR35 mistakes made during the first 12 months unless there are signs of intentional breach.
So far, the letter has been sent to companies within the financial services and oil and gas sectors, but experts believe that compliance checks may be launched in other sectors within the next few months. I am.
According to ICAEW, “The challenge for many large organizations is that the contractor bills the work and is handled by the purchasing ledger team. There is a risk that status checks will be overlooked by human resources and payroll teams. “.
These compliance checks are subject to a number of large public sector settlements that have been subject to OPW regulations since 2017.
The Department for Work and Pensions and the Ministry of Interior faced £ 87.9m and £ 33.5m in tax bills, respectively, for failure to comply with similar reforms in the public sector in April 2017.
Dave Chaplin, CEO of Contractor Calculator, the contracting authority, said: Computer Weekly It is a good sign that HM Revenue and Customs is taking positive steps to ensure that the private sector does not fail to comply with the new IR35 regulations.
“The reforms happened only six months ago and have already begun to look at the sector to make sure they’re done correctly. If there are some easy-to-correct mistakes, find them sooner rather than later. Is much better, “added Chaplin.
HMRC Launches IR35 Compliance Checks in Financial Services, Oil and Gas Sectors
Source link HMRC Launches IR35 Compliance Checks in Financial Services, Oil and Gas Sectors