Partner Article

East Anglia’s 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 East Anglia’s mid-market is struggling to comply with the changes.

The survey found that more than one third (34%) of mid-market businesses in East Anglia are not confident in their business’s compliance with IR35. This is significantly above the national average of one in five (19%) businesses not feeling confident in their IR35 compliance.

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, only half (52%) of respondents in East Anglia were found to be confident in their business’s compliance. With only 12% responding that they were ‘very confident’.

Commenting on the results, James Brown, Partner and Practice Leader at Grant Thornton UK LLP in the East of England, said: “For any business that isn’t sure if it’s in line with the new IR35 rules, now is the critical time to address this concern before HMRC begins its clamp down early next year.

“The significant difference in confidence between East Anglia and the rest of the country could indicate the severity of the changes, upheavals and challenges that the region’s businesses have faced over the past 18 months. When combined with HMRC’s year-long lenience on penalties related to IR35 compliance, it’s possible that many will have overlooked this issue and could end up facing penalties in the not-too-distant-future.

“Any businesses that are seen as being deliberately non-compliant will face significant consequences and 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.

This was posted in Bdaily's Members' News section by Daniel Ash .