HMRC publish off-payroll compliance strategy
HMRC remain committed to ensuring that businesses comply with the upcoming off-payroll changes and have now published their compliance strategy to assist businesses with the implementation.
It has been confirmed that the ‘light touch’ approach to penalties previously mentioned by HMRC will form part of the compliance approach. This means that businesses will not have to pay penalties for errors/inaccuracies regarding the off-payroll rules for the first 12 months unless there is evidence of deliberate non-compliance.
Furthermore, HMRC have also confirmed that they will not use information acquired as a result of the changes to open new compliance checks into the worker’s intermediary (e.g. PSC) for previous tax years prior to 6 April 2021, unless there is reason to suspect fraud or criminal behaviour.
HMRC have committed to supporting businesses to get the off-payroll changes right by assisting those who are genuinely trying to comply with the rules whilst challenging those who seek to gain an unfair advantage by deliberately ignoring the rules.
The core compliance principles which underpin this approach are:
- Support businesses who are trying to do the right thing and comply with the rules;
- Help businesses meet their responsibilities under the off-payroll working rules;
- Help businesses correct any mistakes they make;
- Check that any mistakes have been corrected;
- Identify and correct non-compliance with the off-payroll working rules;
- Challenge deliberately non-compliant businesses;
- Challenge tax avoidance schemes; and
- Use specialist teams to carry out the off-payroll working compliance activity.
It appears that HMRC have taken on board previous comments and criticisms regarding the implementation of the off-payroll public sector rules in 2017 and are looking to provide a framework which will differentiate between those businesses which make genuine mistakes and those which deliberately avoid their responsibilities.
Where HMRC establish that there has been deliberate non-compliance, they may use the full force of their powers, including publishing the names of businesses which have ‘deliberately defaulted’ on their tax obligations. For named businesses this could have a serious impact on their reputation and ongoing commercial dealings.
From the outset of the changes, HMRC will be encouraging businesses to come forward where mistakes have been identified but they will also be actively seeking to identify potential areas of non-compliance. Those activities could include:
- Reviewing and monitoring data received, such as RTI returns, CIS300 returns and Employment Intermediary reports;
- Identifying business sectors which use a high proportion of PSCs; and
- Addressing reported non-compliance, including reports from other parties in a supply chain.
Therefore, it is important that businesses ensure that they implement suitable processes, systems, controls and audit trails which would satisfy scrutiny from HMRC.
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