Concerns raised over IR35 contractor tax crackdown

Concerns have been raised that HMRC is clamping down harder on suspected contractor tax avoidance as part of its generally more proactive approach at the moment.New analysis has found that investigations into suspected tax avoidance by freelancers and contractors working through their own personal companies more than doubled last year, from 23 to 59.A Freedom of Information request submitted by Bloomsbury Professional, a publisher, found that the yield from cases where contractors were found to be in breach of the anti-avoidance rules, known as IR35, increased to £1.25 million in 2011-12 from £219,000 the year before.Martin Casimir, managing director of Bloomsbury Professional, is quoted by the Financial Times as saying, “The crackdown on IR35 fits in with the wider picture of HMRC taking a much more aggressive approach to all sorts of tax cases where it suspects it is missing out on tax revenue.”A spokesperson for HMRC said, “Whether IR35 applies is always based on the facts of the case. HMRC does look behind the reality of the arrangements to consider whether a relationship is one of employment.”HMRC noted that it has also published new guidance recently to make IR35 easier to understand and manage.

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