Guest Blog from KPMG: Offering Advice on off Payroll Worker Compliance

At KPMG we are committed to supporting businesses and communities so that they continue to grow and thrive. We have recently seen much more activity within the sector as a result of the recent off payroll worker changes that are coming into effect in 2020. Many businesses within the sector are currently assessing what impact these changes may have on their business models.

Estimates vary but HMRC expect to close the tax gap of £3.1m by 2023/24 from the changes to the off payroll worker rules being introduced in 2020. As a major supplier of these workers, it is expected that you will bear a significant element of this cost together with your clients and the workers on your books. As all parties seek to understand the cost impact of the new rules organisations are also considering how they comply with the new rules to avoid enforcement action and protect their reputation.

HMRC have been grappling with improving off payroll worker compliance for many years and we expect that the 2020 legislation will seek to establish clear compliance obligations for:

• the individual providing personal services,
• the end-user; and
• all intermediaries in the supply chain.

Clear obligations will make it easier for HMRC to carry out reviews and take enforcement action against the party that has failed to comply. 

Failing to comply not only carries a financial cost in the form of fines but the reputational damage can also prove to be extensive.  Most will agree that naming and shaming non-compliant employers has proved effective in improving compliance with National Minimum Wage and pension auto-enrolment regulations and HMRC may extend this to other areas of compliance.  In addition to naming, under corporate criminal offence, companies may be prosecuted where they do not put in place reasonable procedures to stop the facilitation of tax evasion. 

Companies will be understandably concerned about complex labour supply chains, particularly after HMRC’s recent compliance activity uncovered a number of offshore intermediaries leading to demands for unpaid tax being issued to UK companies. 

To protect against this risk, we anticipate that the new rules will require companies to improve transparency over their supply chain and PAYE compliance processes so that they can demonstrate strong governance to HMRC. Agencies will play an important part in this process.

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If you would like to understand how KPMG can support your business with this matter or wider Tax/M&A matters, please contact Shashi Prashad shashi.prashad@kpmg.co.uk.