Will off-payroll working rules become applicable for your business this coming April? How to prepare for case-by-case tax assessment
Make sure your IR35 compliance strategy is foolproof this April as UK off-payroll tax goes private
As the private sector IR35 reform draws ever closer, time is running out for end-hirers to get down to business and prepare for the changes. From April 6th 2021 privately owned businesses will be legally obligated to determine whether PAYE is off-payroll applicable or not on a case-by-case basis within their supply chain, and with the threat of heavy fines, there’s little room for error. The UK off-payroll tax (IR35) has remained a controversial subject since first coming into force, and with just 10 weeks to go until it reaches the private sector, end-hirers are feeling the pressure. Whilst their soon-to-be responsibility of determining correct tax status may seem daunting, it doesn’t have to be. With the right know-how, you can formulate a successful strategy keeping you in HMRC’s good books and away from potential pitfalls. So what the best way to get prepared for IR35, allowing you to keep your eye on the money, and away from the fines? Check out our expert take on the matter…
Knowledge is key to compliance: get to know the UK off-payroll tax reforms inside out
At first, IR35 can seem like an endless web of information and it may be difficult to predict how and when it will be off-payroll applicable within your supply chain. When you don’t know what you’re doing it’s hard to know just where to start, however, the answer is easy- start with someone who does. Getting in touch with an expert advisor will set you up to make the right decision when the time comes whether your workers fall inside of IR35 or not. Having to assess each contractor case by case unfortunately means that there isn’t a blanket solution. However, having an open and in-depth discussion with an IR35 specialist will allow you to ask questions relevant to your business and equip you to tackle tax assessments successfully in practice.
Once you’ve got the know-how, don’t keep it to yourself: share what you’ve learned with your team, especially internal management so you can collectively ensure that PAYE is applied where necessary. Having several pairs of eyes on the supply chain at once is a sure way to up your compliance game and will enable you to address any potential risks sooner rather than later. Whether applicable to IR35 or not, staying as informed as possible when it comes to your workforce, backed by a team who’s equally equipped will allow you to navigate tax regulations with ease and avoid falling victim to fines.
Assess your whole supply chain and formulate a time-efficient strategy
Once you’ve got the know-how you’ll be able to make a well-informed assessment of your own supply chain in preparation for the reform. This initial assessment should be a head-to-toe review and include everything from your payroll intermediaries and PSC’s to agency vendors. Use your previously obtained knowledge to examine your existing supply chain for any possible risk factors so you can address them sooner rather than later.
Whilst compliance will be critical this April it shouldn’t take too much time away from what really matters i.e. developing your business. This doesn’t mean taking the ‘easy’ route and resorting to blanket bans; in fact, these will potentially hurt your relationship with contractors and affect your ability to outsource skilled workers in the future. Whilst you may see them as a convenient safety net, many temporary workers will be unwilling to face automatic PAYE taxation as it means they ultimately lose out. As well as this, HMRC have declared blanket-bans to be inappropriate, so in terms of keeping up compliance, they’re a less than ideal choice. Like it or not, determining whether your working arrangements fall inside of IR35 is soon to be an unavoidable reality, so focus on perfecting your process.
Apply your knowledge to formulate a streamlined process that’ll allow you to make case-by-case assessments in an accurate and time-efficient manner. This will give you the peace of mind you need to get back to business ASAP meaning you can continue operating compliantly and successfully this April and beyond.
Keep an eye on the numbers
Consulting solid data from the get-go is a great way to stay on track throughout the process. This will back-up your decision-making with a stronger and more relevant context and give you a clearer view of your supply chain. Having access to real-time information at all times will set out a more straightforward trajectory for you to follow as you prepare your strategy and will enable you to instil compliance throughout your supply chain. Not only this but keeping relevant data on hand will also set you up to rebuff any potential challenges from HMRC further down the line.
IR35’s private sector reforms will mean adjustments throughout the supply chain and HMRC will be cracking down on compliance. With just 10 weeks to go, it’s easy to feel apprehensive, however with careful preparation it’s something your business can easily overcome. Though the clock is ticking, it’s not too late to start preparations. With a willingness to learn, an analytic approach and streamlined strategy you can be proactive in facing IR35’s off pay-roll tax changes.
Time is running out so get ready for reform now!