In the month in which we’ve seen UK fuel supplies making the headlines, HMRC has also turned its steely gaze upon the energy industry together with the finance sector. We look at who’s in the IR35 compliance spotlight now.
Oil, Gas, Banking & Finance checks
If you’re operating in one of these sectors, you may have recently received a letter from HMRC asking you to confirm that you’re operating correctly within the off-payroll working (OPW) or PAYE rules. This stems from new regulations, introduced in April 2021, which require all private sector companies to correctly determine their contractors’ employment status and to pay them through a payroll, if necessary, dealing appropriately with their tax and NI liabilities.
The letter, which has been widely circulated and can be viewed here, is headed ‘Applying the off-payroll working rules – effective from 6 April 2021’, and states that it is seeking more understanding about how organisations in the oil, gas, banking and finance sectors recruit contractors. It builds on the guidance and information issued by HMRC here, and claims to look to ‘support customers who are trying to do the right thing and comply with the rules’, highlighting the importance of ensuring your supply chain is compliant and operating in line with status determinations.
New focus
Now apparently, only six months after the new IR35 regulations came into force, HMRC is focusing on the oil, gas, banking and finance sectors because of their historic reliance on contractors. However, in some larger organisations adhering to the new guidelines can be difficult simply because different departments play differing roles in the recruitment and remuneration of their contractors – HR may not liaise effectively with payroll who might not successfully communicate with purchase ledger, leading to grey areas in contractors’ taxation status. Further issues have also arisen as some contractors have taken advantage of this uncertainty in an attempt to minimise their tax liabilities.
Penalties
HMRC claims that it is contacting the organisations targeted simply to seek confirmation that the OPW rules are being correctly applied in order to ensure that it will not suffer a shortfall of taxation revenue at the end of the financial year, which has of course been exacerbated by the fallout from both Brexit and Covid-19.
Some of the Government’s own departments have already been fined for compliance failures resulting in multi-million-pound tax bills. The DWP was fined £87.9m, The Home Office £33.5m, and HM Courts and Tribunal Service £12.5m. These breaches stem from public sector compliance reforms in 2017, and it is clear that there is little chance that private companies will escape penalties if they fail to comply with the rules introduced earlier this year. HMRC claims that it has issued the letter and offered assistance because it wishes to avoid companies amassing large tax bills through early intervention. Despite assurances that HMRC would give organisations time to adjust to the new rules, many have been surprised by the tone of the letter and the rapid nature of its issue.
Clearly, it is vital that organisations who employ contractors ensure that they are fully aware of their status, and comply with HMRC guidelines both to avoid penalties and causing issues of confusion for both themselves and their employees. The oil, gas, banking and finance sectors are the most recent to come under HMRC’s spotlight, but others are certain to receive the same scrutiny in the near future.
As well as determining the status of contractors, organisations must also ensure that their supply chain is completely compliant. Ensuring every supplier is compliant can be a lengthy and complex process, which is where Professional Passport can help. Every business on our Approved Providers list is subject to an in-depth compliance standards and review process, which not only tests against all relevant legislation but also goes further to provide complete transparency of information that is accepted by Industry Trade Bodies, Government Framework Agreements, RPOs, end clients and recruitment companies.
For added peace of mind, organisations can become a supply chain member of Professional Passport, demonstrating they have robust processes in place and only ever engage with suppliers on our Approved Providers list.
If you're looking to work with a provider that’s earned a legitimate seal of approval, head to the Professional Passport Approved Providers list or find out more about becoming a Supply Chain Member today.
Commentaires