This included a £2.9m penalty, issued to Natural Resources Wales for historic off-payroll non-compliance
IR35 specialist, Qdos, has responded to the news that government-sponsored body, National Resources Wales (NRW), has settled an ongoing dispute with HMRC over its compliance under the off-payroll working rules (often known as IR35 reform).
Included within this settlement is a £2.9m penalty, which Qdos say “shines the spotlight on the staggering cost of mismanaging IR35 reform.”
In a statement published on its website, NRW confirms that it has been in discussion with HMRC regarding how the body engages freelancers and contractors since 2017.
This was the year in which off-payroll working rules were introduced to the public sector, resulting in public sector bodies becoming responsible for determining the IR35 status of contractors, and in many cases, carrying the tax liability.
It found errors occurred in determining the IR35 status of contractors engaged by NRW. The tax liability amounted to £14,631,191.13, with NRW also being issued with a £2.951m fine – suspended for 12 months. As a result, NRW has said: “Our processes have now been changed. We are no longer using off-payroll contractors and our default position is that we should not use them in the future.”
Qdos CEO, Seb Maley, said, “The sheer numbers shine the spotlight on the staggering costs of mismanaging IR35 reform – and it’s a timely reminder to all businesses that compliance under the off-payroll working rules is vital. Misinterpret them and misapply the IR35 status of contractors and there’s every chance that you’ll be hit with a big tax bill.
“Stopping engaging contractors altogether isn’t necessary, though – and I’d urge them to reconsider their stance. It’s widely accepted that the off-payroll working rules – while complex – can be managed.
“Many organisations across the public and private sectors have the right processes in place to engage contractors compliantly – a move which allows them to manage costs in an efficient way and tap into the flexibility and skills of the independent workforce.”
Sir David Henshaw, Chair of NRW, said, “As many other organizations in the public and private sectors in the United Kingdom have already discovered – along with others currently facing similar problems – the IR35 rules are complex.
“But we accept that the mistakes that eventually came to light should not have been made. Our focus throughout has been to resolve the issue with CThEF, work in conjunction with them and the Welsh Government, and take the advice of the legal and tax experts available to inform our decisions.”
