Off-payroll working tax reforms present challenges for HMRC

HMRC learned key lessons from the initial roll-out of IR35 tax reforms in the public sector but faces new and challenging risks in implementing the regime more widely according to a report from the National Audit Office (NAO).

Challenges for HMRC include the fact that the labour markets in the private and third sectors are larger than in the public sector which makes monitoring non-compliance a bigger challenge. Complex supply chains are more common in these sectors and they create a greater risk of companies making errors when determining tax status and of the reforms resulting in workers changing careers or business moving overseas. There is also uncertainty over HMRC’s approach to non-compliance in the private sector. Its assessments and penalties have so far only been tested on central government bodies none of which have been challenged in court.

The NAO recommends...