Number of IR35 investigations triples in just six months

THE NUMBER OF IR35 INVESTIGATIONS undertaken by the taxman in the first half of this tax year has tripled on the same period in the previous year.

The legislation, designed to prevent people engaged through personal service companies (PSCs) from taking home more money than they would if they were directly employed, has been the source of various controversies over the past 12 months.

There was public and political anger after it was revealed 2,000 senior office holders of public bodies were revealed to be receiving payment off-payroll, while the BBC revealed in September that 148 of its 467 presenters were engaged in the same fashion.

A total of 193 investigations were opened in the first six months of 2012/13, compared with 59 in 2011/12, according to data obtained by tax and accounting group Bloomsbury Professional.

The investigations are a marked increase on the 23 undertaken in 2010/11 and the nadir in 2009/10, when just 12 were opened. But despite HMRC’s crackdown, so far the 193 new investigations have failed to find any compliance failures.

HMRC’s yield from enquiring about the status of the self-employed was just over £200,000 in 2010/11, with the take breaching £1m last year.

Bloomsbury managing director Martin Casimir said: “IR35 is a very problematic piece of legislation, as it adds unnecessary complication to tax system and makes it hard for ordinary contractors to work out their tax bills. It is very easy to fall foul of the legislation.”

“Now ordinary freelancers and contractors have the added complication of HMRC breathing even more closely down the back of their necks.”