HMRC is consulting around the introduction of a new ‘set-off’ mechanism to supplement the current off-payroll working (OPW) rules.
Currently, if HMRC determine that there has been an error in applying the OPW rules, the fee payer (most commonly the end-user client) becomes liable for any unpaid PAYE which should have been deducted from the fees. In practical terms, this means:
- HMRC enforce this unpaid tax liability, in full, against the fee payer;
- The worker or their intermediary/PSC can reclaim any tax and NICs they have paid directly from HMRC; and
- There is currently no mechanism which allows HMRC to offset any tax/NICs that have already been paid directly by the worker or their own intermediary/PSC.
HMRC therefore proposes to introduce a new ‘set-off’ mechanism and has launched a public consultation on its proposals. HMRC proposes that some, but not all, of the taxes already paid on fee income, by either the worker, or by their intermediary/PSC, should be ‘set-off’ the tax liability for non-compliance with the OPW rules, thus reducing the overall amount payable by the fee payer.
For further information, please contact:
Michael Wright, Partner, Hill Dickinson
michael.wright2@hilldickinson.com
