IR35: HMRC targets £30m windfall from contractors

HMRC is looking to squeeze an extra £29.7m from contractors through investigations into their employment status. The figures were revealed in the Revenue’s recent HMRC’s Spotlight 53 bulletin covering disguised remuneration.

The data refers to tax under consideration, an estimate of how much HMRC thinks it could collect before investigations have been concluded.

Mike Crellin, a director at UHY Hacker Young, said: “HMRC’s crusade against contractors is far from over. HMRC is looking at employment status extremely closely. These estimates show that HMRC thinks there is more revenue that could be squeezed out of the compliance work in this area. Contractors can expect HMRC to continue to take a very tough line.”

HMRC introduced the controversial loan charge this year, which could see backdated taxes recovered from up to 20 years ago from businesses and contractors who used tax planning schemes to reduce tax liability.

It warned businesses and contractors that schemes using capital gains or dividends that attract tax relief to avoid tax liabilities had never been approved by HMRC. Employers and employees are likely to end up paying additional tax, interest and penalties, it added.

Crellin said: “IR35, the legislation targeting people who wrongly register as self-employed to reduce their tax and NIC, is going to be extended to the private sector next year which will likely create more confusion about the employment status of contractors. This is likely to see more mistakes being made – and more fines.”

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