Key update on off-payroll working rules (IR35) for businesses managing payroll

As announced in November’s Autumn Statement, changes have been proposed to the off-payroll working rules (IR35) change, effective from 6 April 2024. These amendments could impact organisations currently undergoing a compliance check under these rules.

What’s changing?

Historically, when HM Revenue & Customs (HMRC) identified errors in a client’s application of the off-payroll working rules, they assessed the deemed employer’s liability for Income Tax and National Insurance contributions (NICs). However, starting from 6 April 2024, HMRC will now consider the taxes already paid by the worker or their intermediary, potentially reducing the amount owed by the deemed employer.

This policy will apply to Income Tax and National Insurance contributions assessed from 6 April 2024 onwards, concerning off-payroll working errors in payments since 6 April 2017.

Potential impact for your business

This change presents an opportunity for organisations with open off-payroll working compliance checks. You may be able to pause the settlement of these checks until after 6 April 2024. To be eligible for a pause, your organisation must meet certain conditions:

• The compliance check has reached the settlement stage.
• You have acknowledged in writing an error in applying the off-payroll working rules.
• The deemed employer’s gross liability, including any penalties, has been agreed upon.
• You provide HMRC with necessary information for the set-off, including the Personal Service Company’s name and registration number, and the worker’s full name or National Insurance number.

What happens next?

For organisations with ongoing compliance checks, HMRC will continue their normal procedures. If your organisation meets the criteria for a pause when settlement is ready, HMRC will offer you the option to pause. If agreed, HMRC will recontact your organisation after 6 April 2024 to settle the compliance check.

It’s important to note that pausing the settlement is optional. If you choose to pause, we advise making a payment on account for the full amount to prevent the accumulation of statutory interest.

Our team is here to provide guidance and support to ensure your business remains compliant and takes advantage of any opportunities these changes may offer.

If you have any questions or need assistance with your payroll and compliance checks, please don’t hesitate to contact us.