Despite the pandemic adding a year’s extension to the original IR35 deadline, recent surveys have shown nearly half of mid-size employers are not prepared for it.
Under IR35 if a contractor is deemed as undertaking the same or similar work as an individual who is a permanent employee, the employer is required to deduct income tax and national insurance from their payment as if they were an employee. This shift essentially moves the responsibility in establishing this to the employer.
The purpose of this change is to ensure individuals carrying out similar/the same roles were paying similar tax regardless of their worker status.
Failure to comply with the new legislation will ultimately incur the employer a fine, however HMRC have said to start with they will take a softer approach to those businesses who have accidentally fallen foul of IR35. However, simply not knowing is no enough of a defence. This will only be applied in instances where reasonable steps have been made to follow the new rules, but mistakes have been made in the process. This is not a green light to cut corners or avoid the inevitable.
HMRC will look to recover and underpayments and the leniency will not last.
If you have any questions on any of the above, please get in touch with the office: sally.phillips@wardwilliams.co.uk or call 01932 830664.