Taxman triples IR35 investigation activity
The taxman has tripled the number of IR35 investigations into contractors suspected of disguised employment, having elevated enquiries under the legislation from just 59 in the previous tax year to 193 in this tax year’s first six months alone.
Revealing the clampdown, Bloomsbury Professional said the increase in IR35 activity in the seven months from April 2012 followed HM Revenue & Customs announcing changes to how it would police IR35 in May of that year.
But despite HMRC and its three crack teams on IR35 “breathing even more closely down the backs” of contractors, the 193 new investigations have so far failed to turn up a single compliance failure, the accountancy group said.
Seeming to explain the fruitlessness of HMRC’s IR35 activity over the period, Bloomsbury’s managing director Martin Casimir said that, while it remains very easy to fall foul of the legislation, there was a “misconception” that people only use PSCs to avoid tax.
“IR35 is a good example of how out-of-date the UK tax system is,” he said, pointing to the zero tax yielded from the 193 enquiries. “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.”
The soaring number of new IR35 investigations in recent months was said to be representative of HMRC’s “increasingly aggressive” pursuit of potentially missing taxes, as it strives to hit the department’s “tough” tax yield targets.