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Roving HMRC teams investigating every IR35 possibility

Let’s face it – nobody likes to think they’ll be targeted by the taxman for an IR35 investigation, but the odds of avoiding one are getting quite a bit longer.

Her Majesty’S Revenue & Customs is all about stepping up their investigations regarding contractors that may be in violation of ‘diguised employment’ rules, especially since last year’s attention-grabbing headlines that revealed how many people had been hiding behind technicalities in order to avoid paying their fair share of taxes. I really can’t blame HMRC in their zeal to step up their policing efforts in this case – especially since so many of these IR35 tax avoidance schemes are being perpetrated by high-profile executives that earn shedloads of cash – but I have to wonder if they’re throwing the baby out with the bathwater by exposing honest contractors and freelancers to too much scrutiny.

There are three new IR35 teams roving about the country, thought to originally be able to undertake a combined total of more than 230 investigations before the beginning of April this year, though this figure has since been revised downwards, according to HMRC statements made to the Public Accounts Committee at a 22 January IR35 Forum meeting. The minutes of the meeting were made available recently, and it was gratifying to know that there were several concerns raised about the quality of the Business Entity Tests the HMRC provided to allow contractors and freelancers to self-assess whether they possibly fall under the disguised employment rule.

While the taxman finally admitted that these tests weren’t its best idea ever – many have called out HMRC for supplying needlessly complex guidance that did little but to obfuscate an already difficult issue – it did say that all of its existing IR35 guidance was currently under review. I can only hope that this will lead to another rewrite down the line with an eye towards clarity and brevity, but I’m not going to hold my breath.

Still, if you’re less than pleased with the HMRC’s current guidance, the taxman is looking for feedback as to how it can improve the quality of its Employment Status Manual concerning how it handles IR35 issues – and how it offers tests and guidelines to the masses..

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