How HMRC will support compliance with off-payroll working reforms

16 February 2021

HMRC has published a policy paper, which details how it intends to support any organisations who are affected by the changes to the off-payroll working rules which will take effect from 6 April 2021. It also discusses the intervention process in circumstances where deliberate non-compliance has taken place.

Organisations that will be required to adhere to the new rules include:

  • Public sector authorities that engage contractors who work through their own limited company or other intermediary
  • Medium and large-sized private sector organisations that engage contractors who work through their own limited company or other intermediary
  • Employment agencies and third parties that provide contractors

The briefing discusses the approach that HMRC will take in relation to new compliance activity, and builds on the concepts initially explained in ‘Ensuring the correct tax is paid’.

Back in February 2020, HMRC confirmed that it would take a ‘light touch’ approach to penalties relating to the changes to the off-payroll working rules. No penalties will be issued in relation to inaccuracies in the first 12 months of the off-payroll working rules being implemented, irrespective of when they are identified, unless they relate to deliberate non-compliance.

Additionally, new compliance enquiries will not be opened into returns relating to tax years prior to 2021-22 unless HMRC has reason to suspect either fraud or criminal behaviour.

Compliance principles

HMRC will support impacted organisations and will also intervene where non-compliance is suspected, as follows:

  • HMRC will support customers who are trying to do the right thing and adhere to the rules
  • HMRC will help customers to meet their responsibilities under the off-payroll working rules
  • Where mistakes have been made, HMRC will assist in correcting them
  • HMRC will check that mistakes are corrected
  • HMRC will identify and correct non-compliance with the off-payroll working rules
  • HMRC will challenge deliberately non-compliant customers
  • HMRC will challenge tax avoidance schemes that claim to swerve off-payroll working rules, or otherwise reduce tax payable
  • HMRC will utilise a speciality team to carry out all off-payroll working compliance activity

Compliance activities

The policy paper confirms that HMRC will amend its compliance activities where new information highlights any emerging areas of concern. Compliance activities include, but aren’t limited to:

  • Monitoring and assessing data, including Real Time Information (RTI) data
  • Identifying business sectors with a recognised high usage of Personal Service Companies (PSCs)
  • Monitoring population trends and the use of PSCs
  • In cases where non-compliance is reported to HMRC, it will act quickly. This includes where reports have been made by other parties in the labour supply chain or contractors

Each of the compliance principles are explained in full, and illustrative case studies provided within the policy paper.


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