Taxman steps up IR35 battle

INVESTIGATIONS into freelancers underpaying tax have doubled, with the taxman scooping more than £1m from its efforts.

The number of probes into whether freelancers should be caught under IR35 rules – where they are effectively employed, rather than working for themselves – has doubled to more than 50.

More than £1m has been recovered by HMRC from those it has suspected of underpaying tax, according to Bloomsbury Professional.

Employees and their employer would normally pay more tax and NI than by paying a freelancer working through their own personal service company.

HMRC’s yield from enquiring about the status of the self-employed was just over £200,000 in the last tax year.

It recouped just £219,180 from enquiring into the IR35 status of workers between 6 April 2010 to 5 April 2011. The previous year saw a yield of £155,502, according to information on the taxman’s website.

Reports suggest that the increase in HMRC’s interest in chasing down those it believes are caught under IR35 correlates with details that emerged of freelancers operating within their own companies while working with the BBC.

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