27th May 2021
What does due diligence mean for you?
Due diligence may not be a phrase that you’ve ever thought of before, and if you are thinking about it now, you may still believe that it bears no relevance to you and your working life, but that may not be the case.
According to Investopedia ‘due diligence’ is
“an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party”
Which again may not mean anything to you at all. But for any public sector organisation, or any medium or large business in the private sector, off-payroll working is now something to be considered whenever a contractor is hired to provide a service through an intermediary. And a cornerstone of the off-payroll working process is the requirement to perform due diligence.
You should perform due diligence to enable you to make a judgement on transactions and the integrity of your supply chain. You should protect your business by testing the credibility, legitimacy, legal and tax compliance of your suppliers, supplies, customers, employees and labour supply.
Failing to take reasonable action to make sure that your supply of labour is legitimate can lead to significant legal, financial and reputational risks to your business. It could even stop your business from operating entirely. You may be liable for unpaid taxes and National Insurance contributions. You may be unable to recover VAT payments and you could be criminally prosecuted with an unlimited fine if someone acting on your behalf facilitates tax evasion.
To reinforce just how important performing due diligence is for a business, HMRC has published new guidance which provides an overview of the checks that businesses should undertake to assure their labour supply chains.
MBKB’s webinar on off-payroll working explains how payroll and the wider business can be affected if due diligence is not undertaken when considering off-payroll working.