THE NUMBER of IR35 investigations undertaken by HM Revenue & Customs grew fourfold in 2012/13.
The legislation, designed to prevent people from lowering their tax bill by not being directly employed, has been the source of various controversies in recent years.
There was public and political anger after it was revealed 2,000 senior office holders of public bodies were revealed to be receiving payment off-payroll, while the BBC revealed in September 2012 that 148 of its 467 presenters were engaged in the same fashion.
There were 256 cases in 2012/13, compared to just 59 investigations into IR35 in the previous year, according to Bloomsbury Professional.
HMRC was heavily criticised at the time for the low number of investigations it had launched, but its response has seen revenues from its IR35 activity grow from £200,000 to £1.1m.
Bloomsbury Professional managing director Martin Casmir said: “HMRC’s attitude towards IR35 hardened following a small number of high profile tax evasion cases in 2012 involving senior executives in the public sector and BBC.
However, this legislation affects everyone working on a contract basis, and it’s very complicated, meaning some honest freelancers are falling foul of the rules.”
A spokesman for HMRC added: HMRC works hard to ensure people pay the right amount of tax at the right time, and that there is a level playing field for all.
“Since April 2012 we have strengthened our specialist teams who enquire into IR35 cases, changing the questions we ask at the start of an enquiry to establish the facts faster, and close enquiries where the contractors are no risk sooner.
“Whether IR35 applies is always based on the facts of the case. HMRC looks behind the contracts and considers the reality of the arrangements to establish whether a relationship is one of employment. To provide greater certainty to contractors we have improved guidance, helping contractors to self-assess their risk of an IR35 enquiry.”
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