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HMRC increases IR35 revenue fivefold in a single year

In the last 12 months, Her Majesty’s Revenue and Customs has increased their IR35 tax yield fivefold, it was recently revealed.

Newly published figures highlighted the taxman’s most recent cut when it came to the disguised employment tax law, boasting a massive £1.24 million in the 2011-2012 financial year. This figure is even more impressive when viewed against the 2010-2011 tax year’s IR35 tax recovery of a paltry £219,000.

A legislation that specialises in ferreting out employees of firms cleverly disguising themselves as contractors or freelancers in an effort to dodge tax, IR35 and its enforcement has been stepped up recently in order to eliminate what some have called a ‘plague’ of tax avoidance activity gripping the UK this year. IR35 investigations are growing like wildfire, with 59 taking place during the 2011-2012 tax year, more than double the 23 in the 2010-2011 year – and just shy of five times the 12 people investigated by HMRC for possible disguised employment in 2009.

HMRC has taken a much more aggressive stance to a wide range of tax issues this year, especially in situations where there is a suspicion of tax revenue going unpaid, industry experts say. The new IR35 crackdown is part and parcel to this widespread attempt on the part of the taxman to wring every last pound from taxpayers who are using tax avoidance schemes of questionable legality in order to hoard their cash and deny HMRC its due – and with the economy in the current shape that it is, the Treasury needs to husband every last scrap of cash to provide crucial Government services.

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