Last week, Kingsbridge IR35 experts Andy Vessey and Ryan Dawson joined forces for our webinar – Perfect Practice for HMRC Claims. They discussed the latest HMRC compliance checks into the application of the off-payroll working rules during the tax year ending 5th April 2022, explaining what the letter looks like and what it means for those who receive one.
We received a huge number of questions and noticed two common themes: Many people:
- Have concerns around where the tax liability sits in the supply chain
- Are not confident in their current IR35 processes
So, to help explain this and provide more insight into the HMRC compliance checks, our IR35 Project Manager Ryan Dawson has put together this special Q&A guide containing some of the most common questions we received during the webinar.
Q. Are the HMRC letters being sent out to end clients, recruitment agencies or both?
A. We’re currently supporting a small number of both insured and non-insured clients. In each of these instances, the HMRC off-payroll compliance letter has been sent to the end client in the chain to which it relates.
Q. What’s the best way to ensure compliance?
A. The off-payroll reform is tricky and complex to navigate without support. It can be made even harder by using HMRC’s CEST tool, which, in my opinion, isn’t fit for purpose following years of criticisms and shortcomings. To protect your position, engage with a specialist like Kingsbridge who can hold the supply chain’s hand from the very beginning. We can help build and implement a robust policy and assessment process that suits your business requirements as well as provide in-house expertise and skill to defend you if HMRC decides to challenge your supply chain.
Q. How do you feel this is going to affect agencies, and what can we be doing apart from talking to end clients?
A. Education is key to ensuring end clients understand their responsibilities. So, it’s essential to maintain great communication throughout the supply chain at all times and maintain best practice processes.
Q. Is there any indication from HMRC’s enquiries that they are prioritising certain sectors of industry or size of companies when it comes to their current IR35 investigations? And is there anything that would ‘flag’ your business to HMRC that we need to be aware of?
A. No, and neither should we know HMRC enquiry criteria. If this became public knowledge, we would all fight just against those criteria. IR35 enquiries are almost completely random; anybody can be picked up for one, so it’s vital that you ensure your processes are robust from the very start.
Q. Should agencies be notifying clients that claims are starting to filter into the private sector? If so, is there anything we should or shouldn’t be saying?
A. Supply-chains should communicate at every opportunity about what’s happening in respect of IR35. Not just in relation to HMRC compliance activity, but everyday issues such as the status of workers, reassessments, changes to working practices and much more. It’s also crucial that end clients are aware of circumstances where the fee-payer may have insured the risk to each party in the supply chain, as often those insurances have claims notification criteria. This might be something which is missed if it’s not communicated from the very start by clients to each party.
Q. Is it better for the end client to talk with HMRC over the phone or in writing via email?
A. As discussed in the webinar, it is the taxpayer’s right to deal with HMRC via email communication if they wish. This is commonly how we deal with HMRC in defending our own clients. By taking this approach, information can be requested clearly, and answers can equally be given with clarity and documented properly so as not to cause confusion.
Q. If the end client has not taken reasonable care in determining the outcome of a worker’s status, will they be liable to the additional taxes?
That’s correct. The client must (amongst other things) take reasonable care when determining the worker’s status. If the client fails to take reasonable care, the liability for the deduction of tax and NICs, the payment of the apprenticeship levy and paying these to HMRC, will rest with them. That responsibility will always remain with the client unless they take reasonable care in reaching their conclusion set out in the SDS.
Q. Do you have examples of when the insurance policy did not cover the parties involved?
Not currently. All clients that have received letters and hold a valid Kingsbridge IR35 insurance policy have had claims accepted and are being supported by the experts at Kingsbridge.
Q. Do you have any recommendations for a good company to use as “Professional Tax Advisors”?
Kingsbridge has a dedicated team of experts who can help guide you through the complications and confusion that come with IR35. We work with a great deal of end clients, recruiters and contractors to help manage risk and enable them to stay compliant.
Q. When completing re-assessments, should these determinations be carried out per assignment or on a regular basis, assuming that the role hasn’t changed?
A. Engagements need to be reassessed when there is a material change to the circumstances. Outside of that, if the circumstances remain the same, we typically recommend that status is reviewed annually as a bare minimum.
Q. HMRC are on record saying no penalties for 2021/22 in absence of fraudulent or negligent conduct. Is this right?
A. In a ‘HMRC issue briefing: supporting organisations to comply with changes to the off-payroll working rules (IR35)‘ in Feb 2021, HMRC said “You 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’s evidence of deliberate non-compliance.”
Q. Are there any stats on the numbers of notification letters being received by clients?
A. No; none that we are aware of.
Hopefully, that makes things a bit clearer with regards to IR35 and the recent HMRC compliance checks. However, if you still have burning questions, we’re here to help. Check out our Ask the Experts page, where our knowledgeable team will provide tailored answers to your questions.
Still have IR35 concerns? Our consultancy offering can support you, including a Kingsbridge IR35 Health Check, designed to review how you assess IR35, your outputs and your overall process in respects of off-payroll compliance.
IR35 Health Check – Ensure you are compliant with off-payroll working rules. Learn more
