TaxPersonal TaxInspectors told to go easy over IR35

Inspectors told to go easy over IR35

Tax Inspectors have been ordered to go easy on the implementation of the Treasury's IR35 crackdown - except when it is being deliberately flouted.

Paymaster general Dawn Primarolo announced in the Commons she had told the Inland Revenue ‘that officials are to give the benefit of the doubt where businesses make genuine mistakes when trying to comply with the rules’.

She revealed the softly-softly approach at the end of a heated debate on what Tory and Liberal Democrat MPs insisted was a deliberate Treasury-lead attempt to move the boundary between employment and self-employment to the disadvantage of the latter.

Primarolo added: ‘That is only fair, given the change during the period. It is a light-touch approach.’

But she warned that where avoidance of tax and national insurance contributions ‘is deliberate and intended’ the same penalties would apply as already exist ‘for trying to avoid paying tax and national insurance.’

The minister also promised to reconsider the position of oil workers forced by North Sea operators to use service companies because the operators feared they would be liable if workers engaged on a self-employed basis failed to pay their tax and NICs.

She claimed the Treasury had doubled their estimate of the extra revenue raised from the crackdown to £900m from a further examination which revealed that ‘the avoidance mechanism is being used far more extensively than we had anticipated’.

The minister firmly brushed aside claims that the crackdown would push IT consultants in particular into emigrating – claiming Germany, the Netherlands, Norway and the USA all operate IR35- type regimes which leave contractors with less take home pay than will be the case in the UK.

And she maintained the definitions of employment and self- employment are unchanged and that the crackdown will only hit those who would fulfil the criteria for employment but for working through a service company, who will still be entitled to a 5% allowance for accountancy and other administrative costs.

Liberal democrat Edward Davey forecast the change would be challenged in the courts as an anti-competitive measure that discriminates against small businesses and ‘favours the big boys’.

Contractors go to court over IR35

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

19h Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter