Investigations into the employment status of contractors could generate almost £30m for HMRC, as enhanced scrutiny into “disguised employment” persists, according accountancy group UHY Hacker Young
HMRC is continuing to look into employment status “extremely closely” according to Mike Crellin, director at UHY Hacker Young.
The latest estimates, from data related to tax under consideration “show that HMRC thinks there is more revenue that could be squeezed out of the compliance work in this area,” said Crellin.
“Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate,” an HMRC spokesperson said, adding that at a given time the Revenue is actively investigating about half of large businesses.
According to Crellin, “Contractors can expect HMRC to continue to take a very tough line”.
He highlighted the controversial loan charge policy, which aims to reclaim backdated taxes from businesses as well as contractors who had previously reduced their tax liabilities through tax planning.
Crellin also highlighted that the proposed extension of IR35 into the private sector next year “will likely create more confusion about the employment status of contractors,” suggesting this would lead to more fines.
The existing off-payroll working rules (IR35) were introduced in 2000 to stop taxpayers avoiding employment taxes by working through their own companies. They were toughened up for the public sector in April 2017 when responsibility for deciding whether the rules apply and for deducting the appropriate taxes passed from the individual contractor to public authorities.
“We enforce the UK’s tax rules impartially, irrespective of the size or structure of the business. We subject the largest businesses to an exceptional level of scrutiny,” the HMRC spokesperson said.
In September last year, ICAEW argued for a delay in deploying IR35 in the private sector, suggesting the complex system was not yet ready to be launched.
In the wake of TV presenter Lorraine Kelly winning a £1.2m tax case against HMRC,the Revenue lost another high-profile IR35 case against Loose Women presenter Kaye Adams in April.
In the case of Adams, it had argued that she was a BBC employee and not a freelancer and should be taxed under IR35. This was ruled against by the First-tier Tribunal.
Original Source - ICAEW
