Changes by HMRC to Allow Off-Payroll (IR35) Tax Offset

In a significant development that promises to bring relief to many businesses, HMRC has confirmed that it will allow current off-payroll working (IR35) audits, compliance checks, and disclosures to benefit from the proposed offset changes planned to be introduced in April 2024. This update comes as a breath of fresh air for engagers who have been grappling with the complexities of the IR35 regulations.

Dated: 08 September 2023 Author: James Hunt, Senior Manager

A Welcome Change

Angela Ferguson, Director and Head of Employment Taxes at PSTAX, part of the Dains Group of Companies shared this critical update on LinkedIn this week, stating, "Hot off the press... I have just been informed by HMRC that they are going to let current off-payroll working (IR35) audits/compliance checks/disclosures benefit from the proposed offset changes set to be introduced in April 2024."

This means that engagers, who were previously unable to benefit from the offset of tax that a worker paid through their Personal Service Company (PSC), will now have this option available, aligning it with the offset available for sole traders. It is a significant step towards reducing the financial burden on employers facing substantial backdated tax bills for workers found to be inside of IR35.

Conditions Apply

It is important to note that this relief comes with certain conditions. HMRC is offering clients the chance to pause their compliance check if their case meets specific criteria. The employer can then benefit from the proposed offset changes coming in from April 2024, potentially applying to errors going back to April 2017.

Expert Insights

James Hunt, Employment Taxes Senior Manager at Dains said, “Great to see a more practical approach now being taken, but impacted businesses who engage contractors who provide personal services through an intermediary still need to have appropriate processes in place to ensure they manage their compliance risks and requirements appropriately.”

With the recent integration of PSTAX into the Dains Group of companies in August 2023, Dains reinforces its commitment to offering insights and tailored solutions in the employment tax landscape. The collaboration with PSTAX is set to foster a synergy that leverages the strengths of both entities, enhancing the depth of knowledge and expertise available to clients.

Looking Ahead

As we anticipate the full details of this to unfold, it is recommended that businesses stay tuned for more updates and consult with their accountancy and legal advisors to understand the implications fully and to prepare accordingly.

Need Assistance?

For further assistance and to stay abreast of the latest developments, feel free to reach out to our Employment Taxes team at Dains on 0121 200 7900 or complete our online enquiry form and we will get in touch with you.