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HMRC's approach to IR35

HMRC has published a briefing to explain the approach it’ll take for new compliance activity in relation to the changes to IR35 from April 2021.

Delayed from 2020 due to the COVID-19 pandemic, from 6 April 2021, existing public sector restrictions and rules on IR35 will be extended to medium and large private sector organisations. Under the change to the rules, instead of the contractor having responsibility for determining their employment status for tax purposes, the client or hirer will need to decide this.

Confirming the ‘light touch approach’ promised by the Chancellor in 2020, the HMRC briefing outlines the principles that will underpin its approach to compliance and contains some case studies of the steps HMRC will take in different scenarios. It also confirms an earlier statement that customers will not have to pay penalties for inaccuracies in the first 12 months of the new regime unless there is evidence of deliberate non-compliance. It also states that HMRC will not use the information acquired as a result of the new rules to open a new compliance enquiry into tax returns for years before 2021-22 unless there is reason to suspect fraud or criminal conduct.