New Off-Payroll Mechanism to Prevent Tax Overpayment in the Works

New arrangements from HMRC seek to improve IR35 regulations by protecting recruiters from unfairness and inequity caused by overpayment of tax. As of last week, this proposal has officially been set into motion! 

Why is this positive? 

The current IR35 Off-Payroll regulations, within which recruitment agencies operate, can sometimes see recruiters being financially penalised. However, with these new measures, incidences of this happening will be reduced.  

An article published on The Global Recruiter reports that the Association of Professional Staffing Companies (APSCo), who represent the recruitment agencies with whom Caroola works closely, has welcomed HMRC’s opening of a new technical consultation that will prevent deemed employers from potentially overpaying tax.  

The consultation also outlines new recommendations for the appeals process – another step in the right direction.  

What happens now? 

The technical consultation will implement a set off mechanism (something which APSCo has long lobbied for) to help prevent the current inequity caused by overpayment of tax. Essentially, this mechanism will be triggered when it looks like an employer (such as a recruitment company) is being asked to pay more tax than they need to. This all comes down to errors in applying IR35 legislation.  

How does this affect us at Caroola? 

For the recruitment agencies who work with us, this is fantastic news! We know that IR35 rules are notoriously tricky to navigate. As a result, mistakes often occur. The introduction of this new mechanism means successfully identifying errors early on. Knowing that there will be a structured system in place to prevent overpaying employer tax will surely bring about a new peace of mind for our recruiters. 

What’s more, APSCo is currently planning on submitting a detailed set of comments to HMRC’s technical consultation. These comments will represent the views of their members within the professional staffing sector, including Caroola. As the flaws in the existing registration are finally being addressed, we hope it will mean greater protection for recruiters and prevent them from being unfairly penalised in the future.