New HMRC guidance on off-payroll working and supplier due diligence

HMRC has recently released comprehensive guidance on off-payroll working (OPW) compliance for end-clients, intermediate agencies, and deemed employers. This guidance establishes clear and extensive minimum compliance standards for organisations subject to OPW rules (also known as IR35). Notably, it outlines both the principles and practical examples of best practices. 

The guidance draws from HMRC’s experience of compliance reviews since the off-payroll working reforms which were originally introduced in 2017 and broadened in scope in 2021. It aims to help businesses understand good practice and avoid non-compliance.

Key aspects of the new guidance

Training 

Organisations should provide robust internal training to staff involved in status determinations and OPW compliance. The training can be tailored to business needs, incorporating generic content or organisation-specific material.

Reasonable care

HMRC expects organisations to:

• benchmark their OPW systems against the new standards;
• address weaknesses; and
• rectify any errors. 

Failure to do so may result in HMRC viewing the organisation as not taking reasonable care, leading to potential liabilities and penalties.

Organisations should perform regular end-to-end reviews of their OPW systems and processes. This includes considering how they interact with other systems and processes such as those required under the Criminal Corporate Offence and the senior accounting officer regimes where relevant. Such reviews could be internal, external, or both.

Whilst the guidance is extensive, it should be used alongside other resources, such as HMRC’s Employment Status Manual. Organisations must adapt the principles to their specific circumstances and demonstrate reasonable care in discharging OPW obligations.

Organisations should take into account the new set-off rules where errors arise. The legislation is being put in place and these rules should apply from April 2024. This will allow HMRC to offset a range of taxes the worker and/or their intermediary have already paid against the amount assessed on the deemed employer. 

Umbrella companies and due diligence

Following a call for evidence on the role and impact of umbrella companies, the government consulted on potential reforms. HMRC has now published guidance, which sets out specific due diligence steps that HMRC expects employment businesses to undertake. In addition to the prospective regulatory reform, this demonstrates the government’s keen focus on non-compliant umbrella companies.

For further information please contact Susan Ball or Joe Pickering.