Thames Valley businesses fear HMRC clamp down on IR35 compliance

With HMRC’s ‘light touch’ approach to IR35 compliance enforcement set to end in April 2022, new research from Grant Thornton UK LLP’s latest Business Outlook Tracker* finds that the mid-market is struggling to comply with the changes.

The survey of 605 mid-sized businesses in the UK found that one in five (19%) are not confident in their business’s compliance with IR35.

From 6 April 2021, for large and medium sized businesses, the responsibility for determining whether a contractor is deemed an employee for tax purposes shifted to the end-user of their services. Broadly, this means that organisations have new obligations regarding their population of contractors within scope of the updated off-payroll working rules (IR35) and could ultimately be liable for PAYE and National Insurance Contributions (NICs) on this population.

However, HMRC has confirmed that it will take a light touch approach to penalties until April 2022.

With only a few months to go before the ‘light touch’ approach ends, less than three quarters of respondents (68%) were found to be confident in their business’s compliance. With only 25% responding that they were ‘very confident’.

Commenting on the results, Jim Rogers, practice leader for Grant Thornton in the Thames Valley, said: “Businesses in the Thames Valley region have been dealing with a roller coaster of changes, upheavals and challenges over the past 18 months. For any business that isn’t sure if it’s in line with the new rules on IR35, now is the critical time to address this before HMRC begins its clamp down. While the guidelines in this area can be difficult to navigate, this won’t be seen as a good excuse for any failures, especially given that the previous 12-month delay to the reforms should have been sufficient time to prepare.

“Any businesses that are seen as being deliberately non-compliant will not only face significant consequences but it will also not prevent any uncollected PAYE and NICs from being due. Firms using agencies to source temporary resource should be aware that a non-compliant approach could already mean that they are on the hook for PAYE and NICs – plus interest – not collected by the agency.”

The research follows the recent launch of Grant Thornton’s Employment Status Intelligence Platform (ESIP) which can support organisations across sectors in navigating the changes from IR35 by providing teams with a robust status assessment tool and IR35 governance platform, complete with comprehensive status determination statements, contractor dispute resolution workflow and an audit trail of assessments.