COMPLIANCE
businesses, in October 2021. There was a focus on oil and gas companies, banking and financial services businesses to start with. We’re now seeing more activity across other sectors. Often HMRC uses an initial letter approach, which might include wording like: “I’d like to talk about the systems and processes your organisation uses to apply the off-payroll working rules. This is for the [current tax year/tax year ended 5 April xxxx]. Initially, I’d like to understand your organisation’s: ● hiring process for contractors who work through their own intermediary, such as a personal service company (PSC) – this could be either directly or using an agency or other labour provider; ● process for deciding the employment status of these workers; and ● process for deciding if any services you outsource are fully contracted out. If at any point you realise you have made a mistake in applying the rules, please let me know straightaway. I can work with you to put it right.” NMW reviews HMRC enforces the NMW and national living wage on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). In 2020/21, HMRC undertook almost 3,000 NMW investigations, identifying almost £17 million of NMW arrears for over 155,000 employees. Penalties of more than £14 million were issued to 575 employers in relation to these investigations. Emerging from the coronavirus pandemic restrictions, the NMW team now has an annual enforcement budget of almost £30 million and a team of around 450 inspectors nationally. This demonstrates HMRC’s commitment to continue promoting compliance and ensuring employees receive at least the NMW for each hour they work. Many employers have fallen foul of the rules and failed to pay the NMW due to technical errors – for example, by taking a deduction from an employee’s pay in exchange for what many would regard as a benefit, such as a savings club contribution. Due to the widespread employer frustration caused by these issues, HMRC introduced an NMW education team that has focused on improving online technical support for employers. This team has hosted several online training webinars over recent months and has added some worked examples to its online manuals on some common NMW risk
areas. The education team has also issued letters to some employers outlining common risk areas, such as changes to NMW rates, apprentices and capturing working time. In addition to these employer letters, HMRC has tried to raise employee awareness of their NMW rights via advertising campaigns and / or letters to workers. These advertising campaigns and employee letters provide contact details for the Advisory, Conciliation and Arbitration Service and / or HMRC, for employees to contact if they have any concerns regarding their pay. HMRC is legally obliged to undertake a full review where an employee complaint has been made. Employers may therefore wish to consider ensuring their workforce understands their pay and how it has been calculated to mitigate the risk in this area. For employers, in addition to the financial implications where NMW arrears are identified, there’s a significant reputational risk, as any arrears identified of more than £500 will likely be shared with BEIS for ‘naming and shaming’. Only where the arrears relate to salary sacrifice arrangements will naming and shaming not be considered in the first instance. Conclusions We’ve recently seen an increase in the number and types of employer compliance interventions initiated by HMRC and this is likely to continue for some time. It’s equally clear that employers should not take these visits or letters lightly, as the financial and reputational consequences could be potentially significant. Our top five tips for dealing with them are: 1.) don’t ignore any HMRC contact and don’t panic – manage HMRC’s expectations if you cannot provide information within the deadline suggested 2.) consider what support you need to help you internally and, if necessary, externally 3.) prepare – collate all the information that’s needed, and ideally review it before providing to HMRC 4.) don’t forget that if you know you have an issue, it’s better to raise it before HMRC undertakes a review, but if HMRC activity has prompted it, any disclosure, even on the day of the review, will be better from a penalties perspective than leaving it for HMRC to find 5.) if asked a question you don’t know the answer to, agree to go away and check – no one is expected to know everything and it’s much better to answer correctly than to give the wrong information. n
charged in scenarios where mistakes are also discovered. Our experience is that HMRC has been supportive in extending the response deadline where employers engage with them proactively and, where hundreds or thousands of employees are involved, reducing the information that needs to be provided by agreement. We understand these reviews are currently taking an average of six months for HMRC to complete, which, considering the complexity of the rules, isn’t surprising. Off-payroll working (IR35) reviews Following the introduction of revised off- payroll working administrative rules for public sector engagers from 6 April 2017, the National Audit Office (NAO) has reported that HMRC started its compliance activity relating to these rules with an initial risk assessment of 16 public sector bodies They range from government departments through to the National Health Service, fire, police and higher and further education bodies. For those bodies it considered to demonstrate high risk, it undertook more detailed reviews, and this activity was expanded as time moved on. It covered 59 public sector bodies by September 2021, of which 35 have been subject to detailed compliance checks. The NAO also reported that five government bodies have alone settled, or expect to settle, demands from HMRC totalling £263 million due to non-compliance with the revised IR35 rules. There were problems with the completion of status checks, based on contract wording only, and not a review of the full facts and circumstances of the engagement. The revised rules were extended to medium-sized and large private sector businesses from 6 April 2021, with HMRC agreeing to provide a light touch to penalties in the first year the regime applied to these businesses. This period has now ended. Even before the first year of the new regime ended, HMRC started carrying out its first compliance checks among private sector
| Professional in Payroll, Pensions and Reward | July - August 2022 | Issue 82 24
Made with FlippingBook - Online magazine maker