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Off-payroll working from April 2021: HMRC’s compliance and enforcement strategy

HMRC’s compliance and enforcement strategy

What does HMRC’s approach to the new regime mean for you?

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The basis on which HMRC will ensure organisations comply with the new off-payroll working rules from 6 April 2021 has been published. This provides valuable insights to organisations as they prepare for the new regime, as well as demonstrates HMRC’s commitment to introduce the new rules without further delay.

HMRC’s compliance and enforcement approach

HMRC intend to take a collaborative approach to helping organisations discharge their new obligations.

Key points are that:

  • Even where there is no indication of non-compliance, HMRC might ask organisations that operate in a sector with a high use of Personal Service Companies (PSCs) to discuss how they are applying the new rules;
  • These discussions might include requests for information which let HMRC confirm the organisation is applying the rules correctly (e.g. to ensure ‘end clients’ are taking reasonable care when preparing status determination statements);
  • However, HMRC will not assure the status of specific engagements or processes during these exchanges;
  • Unless there is evidence of deliberate non-compliance, HMRC will not impose penalties for inaccuracies that arise before 6 April 2022; and
  • Where errors are identified, HMRC might review available data (e.g. RTI submissions) or otherwise follow up to ensure systems and processes are compliant and errors have been corrected. Where liabilities are identified HMRC consider that PAYE/NIC is due without offset for tax paid by PSCs or workers, albeit we are discussing this point with them.

HMRC will actively monitor RTI and other data they receive and focus their activities on sectors with high use of contingent labour. Compliance reviews will be carried out by a specialist team. 

What should organisations do now?

The new off-payroll working regime comes into force in fewer than 7 weeks. Publication of the compliance approach should allow organisations to consider HMRC’s expectations when finalising their planning.

The ‘light touch’ approach to errors in the first twelve months of the new regime is welcome, and organisations should take the opportunity to review their new processes – and refine them – based on their experience over this period.

Specific points to consider in the run up to 6 April and beyond include:

  • Is implementation on track? If not, what needs to change at this stage to ensure you’re ready for 6 April?
  • Are the new systems, processes and documentation robust enough? Robust systems and processes demonstrate reasonable care and are necessary to meet the demands of the Senior Accounting Officer regime.  How comfortable are you that you can demonstrate your decisions on status are rigorous?
  • Have all off-payroll workers been identified? Have you completed a robust assessment of your contingent labour to ensure you have identified all potentially impacted workers? How will you ensure this remains up to date as more suppliers are engaged and other engagements evolve? Have you considered your position on outsourced services?
  • Has the impact on supply chains been thoroughly reviewed?  Do you know how any employment agencies you engage with contract with the people they provide? Are they all on the agency’s payroll, or could they be engaged via individual PSCs meaning you need to issue status determination statements?  Have you reviewed your contractual arrangements to ensure responsibilities are clear and where any issues could arise you are appropriately protected?
  • Are day-to-day engagement activities reflected in status determination decisions?  Determinations must be based on the highest quality information and a full understanding of all relevant facts – and be revisited as and when those facts change.  Are your line managers fully aware of what you need to know about the practical realities of how engagements are operating and what to do if they change?
  • Are your organisation’s policies clear across the supply chain?  Suppliers, line managers and the rest of your organisation must be clear on your policies and what’s expected of them.
  • Is the dispute process effective?  Have contractors been given opportunities to ensure you’ve taken their personal business positions fully into account? Do you have a fair and compliant process to effectively communicate your decisions if appealed by an agency or contractor? This can be particularly sensitive, and it is important that the process is robust.

How KPMG can help

We have extensive experience of assisting organisations prepare for the new regime and have developed a suite of technology solutions that includes:

  • A tool to identify workers and confirm the existence of PSCs with Companies House;
  • An employment status assessment tool tailored to the role profiles that exist in the organisation; and
  • A workflow tool to share information, provide status determination statements and resolve disputes (which also captures and stores relevant information for presentation to HMRC in the event of a review).

If you would like to talk through how KPMG can help your organisation prepare for the new off-payroll working regime, please get in touch with your normal KPMG contact, or e-mail Matthew HunnybunCaroline LaffeyColin Ben-NathanAnne-Marie Robinson, or employersclub@kpmg.co.uk.

Some or all of the services described herein may not be permissible for KPMG audited entities and their affiliates.

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.

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