Meet Nigel Nordone, our Head of Tax. In this article he shares with us a few insights from his time as a tax inspector for HMRC, alongside a few tips for agencies on the best approach to the 2021 IR35 reform.
What exactly makes you our resident expert in tax? How does this help you in your day to day job?
I have been involved in tax work and dealing with tax enquiries of various forms since qualifying as a HMRC Inspector over 20 years ago and in the private sector from 2006. During that time, I have dealt with hundreds of enquiries including those into sole traders, partnerships, companies, and enquiries under Code of Practice 9 as well as IR35, employment status, and employer compliance reviews, including representing clients via HMRC’s Alternative Dispute Resolution process and at Tribunal.
Since joining the Qdos family, I have been heading up the tax team here as Head of Tax. This means using a broad range of skills, from reviewing contracts to assessing corporate compliance checks for recruitment agencies and end clients.
Working at Qdos enables me to provide an unparalleled level of support to all members of the contractual chain. A big part of my work here is focused around educating recruiters and end clients on best practice while also offering advice and the benefit of the experience I have gained during my years dealing with tax enquiries.
As a former tax inspector for HMRC, are there any insights you can share about the implementation of the off-payroll rules?
The main advice that I can give in respect of the off-payroll reform is do not ignore it or pretend that it is not happening in the hope that it will go away or that HMRC will not look at your business and how it engages contractors.
In my experience, when implementing new tax legislation HMRC take an extremely proactive approach when it comes to policing businesses’ compliance. Often, they significantly increase the amount of investigations and reviews that are carried out for two reasons:
- To ensure that the businesses operating within the new tax legislation are doing so correctly.
- To ensure that the businesses who choose not to operate within the new tax legislation, even if it applies to them, are investigated and where necessary penalised for their non-compliance. This can, in extreme cases, include publicly naming the business involved.
Taking a proactive approach to the reform is easier than you would think. Here at Qdos, we are helping over 2,200 recruiters and end-clients prepare for the changes that we will see coming in on 6th April 2021. With the help of Status Review, our complete support service for determining and managing IR35, we can help you prepare for the reform in a way that best suits your needs.
One of the most crucial things is ensuring you have undertaken, and kept a record of, your due diligence. That is to say that HMRC will be looking to see that you have taken the necessary steps in accurately determining IR35 status for all relevant engagements.
Due diligence is a term that is mentioned a lot when it comes to IR35 but is seldom explained. The term due diligence is often used in relation to another common term ‘reasonable care’, in so much as that they both relate to the careful consideration and assessment of your compliance with the legislation. Put simply in relation to IR35, due diligence would be shown by treating compliance with the respect it requires, such as following all necessary processes in a timely manner, and carefully assessing engagements with both personal service companies and suppliers.
You should remember that while the reform feels daunting, here at Qdos, 91% of individually assessed determinations are outside IR35. You should be taking the time between now and April 2021 to take control of your IR35 determinations and obtaining the support of experts who can support you through any compliance activity. In our experience, those who prepared early for the changes were in the best position come April.
With IR35 reform coming April 2021, what do you expect compliance activity to look like thereafter?
At the moment this is hard to say, however, what is clear is that the off-payroll reform moves away from the requirement for HMRC to investigate one individual contractor at a time in respect of their employment status. This now allows HMRC to go directly to the agency or end client to review employment status for all the contractors that they engage.
As such, in my opinion this could lead to HMRC opening an enquiry into the company or agency in question. Rather than solely looking at employment status, it could allow them to look at the company or agency as a whole including PAYE, National Minimum Wage, VAT etc. By doing so, this would save HMRC time, resource and cost, which is something that they are always keen to do.
One thing that can be said about the implementation of the reform is that while speaking at an event in Birmingham Rishi Sunak implied that there will be a ‘soft landing’ for the initial year of the off-payroll changes coming into effect. This is intended to give members of the contractual chain time to adjust and work out any teething problems with the new process.
Despite this, you would do well to remember that HMRC will be keen to recoup any tax and NIC that they can after what we have already seen to be a year-long delay to the IR35 reform. In any case, soft-landing or not, it would be wise to ensure you are prepared and take a careful and measured approach to compliance going forward.