Despite the uncertainty of the coronavirus pandemic, HMRC look set to push on with the proposed IR35 changes with updates to aspects of its Employment Status Manual.
The changes brought in by IR35 have already been delayed by a year as a result of the coronavirus pandemic and it would appear that HMRC are currently determined to stick to the updated deadline for April 2021.
The New IR35 Rules
While there’s no change to the principles which determine if IR35 applies, from April 2021 the responsibility for applying the rules shifts from those doing the work to the business that pays them – but only if it’s a large or medium-sized business.
HMRC application of the new rules
HMRC have confirmed its commitment to not using new information received as a result of the changes to open up retrospective enquiries into earlier tax years. With HMRC seeking to reassure workers that their intermediary entity, will not be subject to new compliance checks using information from the off payroll working reforms, for tax years prior to 6 April 2021, unless HMRC has reason to suspect fraud or other criminal behaviour.
In order to underline this supportive approach, HMRC have also announced that they will take a light-touch approach to penalties. Taxpayers will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance.
In practice, the new approach will likely only apply in very limited circumstances. If you personally provide services to a client but invoice them through an intermediary (your company, partnership, etc), keep a record of how you arrived at your view that it didn’t apply. This can include results produced by HMRC’s check employment status for tax (CEST) tool.