HMRC increased IR35 investigations threefold throughout 2012 – 2013.

HMRC managed to treble the amount of IR35 investigations in the first half of 2013 and the number is rising still. Contractors who were feeling pressured by the taxman’s obsession with IR35 should not expect any relief for sometime yet. This follows on from last year’s increase of the number of investigations into disguised employment which went from just 59 to 193 to 400 very quickly. The figures, relating to the 2012 – 2013 tax year were revealed earlier in the year by Bloomsbury Professional who noted the massive increase in IR35 related activity in the 7 months after April 2012.

The increase in investigations is thought to be a direct result of the national anger throughout the UK relating to tax avoidance in general and specifically to a number of senior employees of public companies (such as the BBC) who were ‘outed’ as receiving their renumeration through off-payroll methods. Indeed the BBC was shown to be paying over 150 of its 470 presenters in such a way. The very public and political nature of discussions about to tax avoidance is thought to be behind the government’s obsession with chasing contractors under the IR35 regulations and contractors unhappiness at the current state of play. The Managing Director of Bloomsbury, Martin Casimire noted that whilst it was incredibly easy to accidentally fall within the legislation, the idea that contractors only do so to avoid tax was false:

“IR35 is a good example of how out-of-date the UK tax system is …It doesn’t take into account the changing face of employment, an d assumes that all taxpayers work in the same job for a long period of time.”

Perhaps contractors should not worry too much just yet however. Even with HMRC employing 3 ‘crack teams’ to concentrate ‘increasingly aggressively’ on IR35 and who will be ‘breathing down the backs of contractors’ the fact is that there were still only 193 investigations during that period. More embarrassing still, they failed in all their pursuits to uncover one single example of compliance failure.