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16th February 2021

HMRC outlines off-payroll working compliance approach

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On 15 February 2021, HMRC published a policy paper outlining its compliance principles for medium and large private sector entities that engage workers through intermediaries, and for employment businesses and other third parties that supply such workers to such clients. The compliance principles, illustrated by some case studies, are intended to underpin how HMRC will support compliance and tackle non-compliance with the off-payroll working rules.

Changes to the off-payroll working rules mean that the responsibility for determining whether the rules apply will shift from the contractor’s professional service company (PSC), to the client organisation engaging them. Where a contractor provides their services through a PSC, from 6 April 2021 it will be the responsibility of all medium and large-sized private and voluntary sector organisations (and all public organisations) to assess the contractor’s employment status for tax purposes. If the rules apply, the client organisation, agency or third party paying the contractor’s PSC will then be responsible for accounting for employment taxes and NICs.

Among other things, HMRC has confirmed in the policy paper that it will not charge a penalty for mistakes in applying the rules or making status determinations if reasonable care was taken.

For more information on any of the items raised in this article please contact a member of the Employment Law Team.