IR35 Off-Payroll Working Rules & Penalty System
Posted on 24th June 2022 at 14:51
HMRC’s 'grace period' for IR35 penalties in the private and voluntary sectors ended in April. Subsequently, this means for any Company that ‘accidentally’ breaks the rules, it is probable that they will be liable to face penalties of up to 100% of the unpaid tax due to any inaccuracies.
As from the 6 April 2022, the penalty regime imposed by HMRC for inaccuracies (based on the reason for that inaccuracy) is:
• A penalty of 30% of unpaid tax if HMRC deems that you were careless about your employment status but did not know it was inaccurate
• A penalty of 70% of unpaid tax if HMRC finds that you knew you were within IR35 and yet chose not to act
• 100% of unpaid tax if HMRC finds that you have actively tried to conceal your IR35 status and underpayment of tax
If it is established that a business has taken 'reasonable care' then the penalty can be avoided.
Updated IR35 rules - Main framework
* The end user (in most cases), is responsible for determining whether the working arrangement is in the scope of IR35 or outside of it
* If considered ‘in scope’ of IR35 then the arrangement is considered by HMRC as full-time employment and subject to NICs and other employment rights
* If considered ‘outside the scope’ of IR35, HMRC will view the Contractor as self-employed due to all or some of the following working factors:
♦ The Contractor chooses when, where or how they work
♦ They are responsible for their own taxes
♦ They have more than one client
♦ They may tender for contracts
HMRC have requested we share information (the link is below), here you will be able to access videos, register for free webinars and for signing up to email alerts, all designed to help with IR35 Off-payroll working rules:
Further to that, blog posts for sharing which can be found below:
And finally Fact Sheets / Checklists aimed towards Clients, Contractors & Agencies
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For help and advice with this or any other tax / accountancy matter, then please get in touch with us by completing the form below:
Disclaimer:
Whilst every effort in ensuring the accuracy of the content of these notes has been considered, we cannot be held responsible in any way in regards to any consequences and/or decisions arising from the information provided. For specialist advice tailored to your individual circumstances - please seek professional advice and contact us on the above details.
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