Currently, when HMRC finds that a client has made a mistake in applying the off-payroll working rules, the deemed employer is assessed for income tax, national insurance contributions (NIC) and the apprenticeship levy (where relevant). This assessment takes no account of taxes paid by the contractor or their personal service company.
HMRC is consulting on a legislative change that would provide a limited set-off for the taxes paid by the contractor or their personal service company.
Where compliance checks may be reaching the settlement stage, but would benefit from a set-off of taxes paid by contractors and their personal service companies, HMRC is adopting the pragmatic approach of contacting deemed employers to inform them of the impacts that a potential set-off may have on the settlement of their open off-payroll working compliance check. HMRC will give them the opportunity to briefly pause conclusion of their enquiry pending a set-off decision. Deemed employers may then take up this invitation or proceed to settlement. It should be noted that a decision on whether to proceed with legislation has not yet been made.
Pauses to off-payroll working compliance checks will be subject to certain conditions, which are set out in a letter to deemed employers from HMRC.
Deemed employers wishing to discuss an ongoing off-payroll working compliance check can speak to their HMRC client compliance manager (CCM), or the HMRC tax specialist (TS) leading the check. HMRC’s TSs have written to all of the deemed employers they believe may be eligible for the settlement pause. This should have been completed by Tuesday 12 September.
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