‘No fines for IR35 mistakes in the first year’

Employers will not have to pay penalties for inaccuracies relating to the new off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance, according to new Government briefing.

From 6th April, private sector employers will come under IR35 legislation on off-payroll working. The aim of the legislation is to discourage ‘disguised employment’, but it is proving very controversial with contractors complaining that there is evidence employers will implement the changes in a blanket fashion.

Organisations that need to comply with the rules include public sector authorities which engage contractors who work through their own limited company or other intermediary, medium and large-sized private sector organisations which engage contractors who work through their own limited company or other intermediary and employment agencies and third parties which supply contractors

The HMRC briefing says mistakes can include payments being made to contractors without the correct deductions being made or making inaccurate employment status determinations, resulting in over or under payment of taxes.

It says that if employers realise they have made mistakes, they should report this as early as possible so that they can be put right. Normally employers can be fined in the case of underpayment of tax, but the briefing says the Government will not charge a penalty if employers took reasonable care to apply the off-payroll working rules correctly, but still made a mistake, including making mistakes in status determinations.

Moreover, they will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months of the operation of the new rules unless there is evidence of deliberate non-compliance.

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