IR35 changes – transfer of debt for off-payroll working

In anticipation of the April 2021 changes to IR35, the delayed introduction of the private sector off-payroll working rules, HMRC has recently published regulations (SI 2020/1150) to allow for the recovery of PAYE from other relevant persons in a contractual chain involving the provision of off-payroll workers.

While the ability for HMRC to pursue someone other than the party paying the off-payroll worker (the fee-payer) has always been intended to be included in the reforms, the introduction of these new regulations underscores the importance end clients need to place on considering their obligations under the reformed off-payroll working rules.

While many end clients who use third party intermediaries (i.e. an agency) will have been aware of their obligations to make an assessment of the status of off-payroll workers from April 2021, many who use intermediaries will have assumed that having made the assessment, their obligations under the legislation have been met.

What these regulations make clear is that should the fee-payer fail in their obligations to withhold PAYE from the off-payroll worker, HMRC will have it within their power to transfer the liability unpaid PAYE to the end client.

For end clients with one or more intermediaries between themselves and ultimate off-payroll worker, the introduction of these regulations demonstrates the need for them to undertake due diligence, and continue to review, the third parties engaged throughout the contractual chain – particularly the fee-payer.

With no indication from the government of a further delay to the implementation of the legislation and less than 100 days until the off-payroll reforms are due to come into force, engagers of off-payroll workers need to prioritise reviewing not only their obligation to determine the status of the worker, but also ensure they have sufficient practices in place to monitor and ensure the obligations of all parties to the contractual chain are being met.

Should you have any questions or concerns on what the off-payroll changes mean for you or your clients, please get in touch with Steve Ashworth, who would be happy to help.