New approach to contractor legislation IR35 yields £1.1m for HMRC
10 December 2013
A new HM Revenue & Customs (HMRC) approach to policing IR35, the legislation aimed at disguised employment, resulted in a tax yield of £1.1m, the tax body says.
Tue, 10 Dec 2013A new HM Revenue & Customs (HMRC) approach to policing IR35, the legislation aimed at disguised employment, resulted in a tax yield of £1.1m, the tax body says.
The pilot scheme began in April 2012 and saw HMRC strengthen specialist teams and centralise IR35 enquiries within these teams. The approach was developed with feedback from the IR35 Forum, which includes recruitment industry bodies and other stakeholders.
It also changed HMRC’s approach to enquiries to attempt to establish the facts faster and close enquiries that were low risk quickly. Alongside this HMRC refreshed its risk profiling for potential IR35 charges.
In a statement on its website, HMRC says: “In 2012-13 HMRC opened 256 cases where IR35 was the main risk. From the IR35 enquires closed in the 2012-13 year (some of which were opened prior to 2012-13) the yield was £1.1m. HMRC closed 85 of the cases opened in the year for nil [tax revenue].”
HMRC did not immediately respond to recruiter.co.uk’s question of how this compared with the previous tax year.
The statement continued: “Customer co-operation enabled many of these cases to be closed within three months of being opened, but all were closed within 12 months, fulfilling HMRC’s commitment to close cases early where on investigation they were low risk.”
Some of the cases opened in 2012-13 are still open and these represent cases where HMRC consider there are still risks that need addressing. HMRC is also currently reviewing the process as a whole.
Samantha Hurley, head of external relations at the Association of Professional Staffing Companies (APSCo), which she represents on the forum, says: “We are pleased that HMRC is constantly reviewing its guidance to ensure that any measures introduced are targeted at the right areas.
“It’s crucial however that HM Treasury focuses on giving legal certainty to the millions of SMEs out there. At the moment few tax advisers can say with certainty whether SMEs fall into the provisions of IR35 or not.”
The pilot scheme began in April 2012 and saw HMRC strengthen specialist teams and centralise IR35 enquiries within these teams. The approach was developed with feedback from the IR35 Forum, which includes recruitment industry bodies and other stakeholders.
It also changed HMRC’s approach to enquiries to attempt to establish the facts faster and close enquiries that were low risk quickly. Alongside this HMRC refreshed its risk profiling for potential IR35 charges.
In a statement on its website, HMRC says: “In 2012-13 HMRC opened 256 cases where IR35 was the main risk. From the IR35 enquires closed in the 2012-13 year (some of which were opened prior to 2012-13) the yield was £1.1m. HMRC closed 85 of the cases opened in the year for nil [tax revenue].”
HMRC did not immediately respond to recruiter.co.uk’s question of how this compared with the previous tax year.
The statement continued: “Customer co-operation enabled many of these cases to be closed within three months of being opened, but all were closed within 12 months, fulfilling HMRC’s commitment to close cases early where on investigation they were low risk.”
Some of the cases opened in 2012-13 are still open and these represent cases where HMRC consider there are still risks that need addressing. HMRC is also currently reviewing the process as a whole.
Samantha Hurley, head of external relations at the Association of Professional Staffing Companies (APSCo), which she represents on the forum, says: “We are pleased that HMRC is constantly reviewing its guidance to ensure that any measures introduced are targeted at the right areas.
“It’s crucial however that HM Treasury focuses on giving legal certainty to the millions of SMEs out there. At the moment few tax advisers can say with certainty whether SMEs fall into the provisions of IR35 or not.”
Tom Hadley, Recruitment and Employment Confederation, director of policy and professional services, says: “The new approach will take time to bed down but is a step in the right direction. Providing as much clarity as possible to individual workers and to recruitment providers is crucial. We welcome the fact that low-risk investigations are being closed more swiftly rather than being allowed to drift. The goal for any new approach must be to ensure that IR35 rules do not stifle the crucial contribution of self-employed contractors, interim managers and freelancers to the UK economy.”
