Tax-News reports that HMRC increased the number of IR35 investigations during the first half of this tax year six-fold. In 2011/12 there were 59 investigations, yet in the first half of 2012/13 there were 193 new investigations.
What has been the result of this increased probing?
The increase in investigations into "disguised employment" arose as a result of the recent furore over senior public sector figures being paid through personal services companies, to avoid liability to personal income taxes and national insurance contributions.
Martin Casimir, Managing Director at Bloomsbury Professional, said:
“HMRC has been stung into action by a handful of very high profile cases where individuals and employers may not be IR35 compliant. Ordinary contractors and freelancers are now dealing with the fallout.
IR35 is a very problematic piece of legislation as it adds unnecessary complication to the tax system and makes it hard for ordinary contractors to work out their tax bills; It is very easy to fall foul of the legislation. Now ordinary freelancers and contractors have the added complication of HMRC breathing even more closely down the back of their necks.
It is a common misconception that people only use personal service companies to avoid tax. For some individuals with more than one employer or for those working on a temporary basis, registering as a personal service company is a legitimate way to work.
IR35 is a good example of how out-of-date the UK tax system is. It doesn’t take into account the changing face of employment, and assumes that all taxpayers work in the same job for a long period of time.”
Tax does have to be taxing.
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