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IR35: government confirms ‘light touch’ to penalties for first 12 months

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The government has responded to the review of changes to the off-payroll working rules with confirmation that the new rules will apply from 6 April 2020. Among the review recommendations adopted are:

  • a ‘light touch’ to penalties for inaccuracies during the first 12 months;
  • an obligation on clients to provide workers/agencies on request with confirmation of the size of their organisation within 45 days; and
  • confirmation that clients based overseas with no UK presence will not need to apply the rules.

HMRC has published a summary of its compliance approach to the new rules and is continuing its programme of education and support with publication of a supplementary package of materials in Off-payroll working rules: communication resources. Further updates have been added to the employment status manual to reflect the changes introduced by the review.

The ICAEW tax faculty has welcomed the ‘smoothing’ amendments, but has concerns about continuing uncertainty in the following areas:

  • where clients provide contractors and agencies with confirmation of their size, contractors may not be aware the obligation falls on them to apply IR35 if the client is ‘small’;
  • if contractors do not receive a status determination statement, it may not be clear to them whether this is because the client has decided the contractor is not a deemed employee, or because the client is offshore, leaving the contractor to apply the IR35 rules; and
  • if the contractor disagrees with the status determination, there is still no deadline by which the contractor must initiate the client-led disagreement process, potentially leaving the client exposed to a disagreement being raised for an indefinite period.

HMRC intends to commission external research into the impact of the new rules, including on how status determinations are being made, six months after implementation.

Issue: 1478
Categories: News