HM Revenue & Customs is clamping down on contractors in its latest revenue-raising tax drive, warns DSH Chartered Accountants and Business Advisors’ services.
The IR35 tax legislation campaign will target those workers who provide their services to clients through a limited company – a ‘personal service company’ – such as IT technicians and engineers.
Companies will be required to undertake a 12-point risk assessment survey that covers operational topics such as business premises, advertising, client risk and previous PAYE.
Depending on the answer to each question, a company will score points. If more than 20 points are scored, the company will be deemed at a low risk of falling within the ‘IR35’ rules; from 10 to 20 points, the company will be at medium risk; and below 10 points, it will be at a high risk of falling within the rules. Those companies at medium and high risk may expect to receive further enquiries.
Steve Carpenter, Tax Advisor at DSH’s Maidstone office, said: “HMRC introduced IR35 in 2000 as a way to tax those self-employed workers who avoid National Insurance payments through the use of intermediaries, such as agencies and personal service companies. The Revenue is now clamping down on this group, arguing that they should instead be treated as employees of their clients – and taxed accordingly.
“HMRC has been writing to personal service company contractors in the meantime to warn of the IR35 investigation they may face. HMRC is asking those who have deemed themselves not subject to the legislation to provide evidence and to explain how this conclusion was reached; so far letters have only been sent to those deemed as ‘high-risk’.
“We would urge anyone who thinks they may be liable for tax payments to get in touch with us to discuss their circumstances.”
To find out more about DSH Chartered Accountants and Business Advisors’ services, visit www.dsh.co.uk or call 01622 690666.