HMRC have issued new advice aimed at helping operators stay on the right side of new tax laws.
The document, which can be found here, lays out how HMRC will monitor organisations engaging drivers and other contractors who work through their own limited company when new tax rules kick in.
It states that:
The off-payroll working rules have been in place since 2000. They are designed to make sure that an individual who works like an employee, but through their own limited company (usually a personal service company ‘PSC’) or other intermediary, pays broadly the same Income Tax and National Insurance contributions (NICs) as other employees. The rules do not apply to self-employed individuals.
The changes to the off-payroll working rules mean that the responsibility for determining whether the rules apply will shift from the contractor’s PSC, to the client organisation engaging them.
Where a contractor provides their services through a PSC, from 6 April 2021 it is the responsibility of all medium and large-sized private and voluntary sector organisations, and all public sector organisations, to assess the contractor’s employment status for tax purposes.
The guidance from HMRC also sets out their compliance principles, and explains that in February 2020 HMRC published a statement about our supportive compliance approach to the changes to the off-payroll working rules. This explained that they will take a ‘light touch’ approach to penalties.
Customers will not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, regardless of when the inaccuracies are identified, unless there’s evidence of deliberate non-compliance. This commitment has not changed.
Read the full guidance document from HMRC here