What are the consequences for businesses of non-compliance with off-payroll / IR35 legislation?

Non-compliance with the off-payroll legislation has implications for private sector businesses which are medium or large.

The entire premise of the off-payroll IR35 reforms was to switch the responsibility for the status assessment and associated tax liability from the contractors' limited company to the firms hiring them. If the hiring business is small, then the old rules still apply and the contractor is liable. But, it's only when the "client" is medium or large that the rules need to be considered.

Under the off-payroll legislation, the client or fee-payer owes the tax debt.

Where the rules apply, HMRC can look back up to four years for income tax and six years for National Insurance Contributions. A further two years for income tax can be considered if the business has been careless.

If a business ignores the legislation, and has no documented audit trail of considering and applying the legislation, they would be considered careless. HMRC can then add penalties of circa 30% on top of the tax.

To avoid the consequences of non-compliance, businesses must conduct robust status determinations and seek professional advice if they do not have in-house expertise.

IR35 Shield offers an end-to-end service to help businesses take the necessary steps to comply with the IR35 & off-payroll legislation.