IR35 – A Growing Concern
For any contractor operating within the UK, the perks of the profession reach far beyond the daydream of ‘being your own boss’. The fact that limited company contractors are not subjected to the same tax rules as employed professionals is often the most powerful lure for individuals entering into the self-employed arena.
Operating as a limited company enables you to pay less tax than an employed counterpart (a fact that would no doubt leave your current co-workers green with envy). The fact that a contractor’s ‘take home pay’ is commonly higher than those working in employment is certainly something that entices many PAYE employees into becoming contractors in the first place.
With contractors being subjected to this lower tax bracket, HM Revenue & Customs strive to ensure the compliance of these limited companies, making certain that those being taxed as contractors are operating like contractors. IR35 exists as both a deterrent and an enforcement to combat tax avoidance through limited companies, and with a rapidly growing influx of freelancer/contractors entering the market, the tax office have been quick to retaliate.
The Government has seemingly been ‘upping the ante’ of late in regards to IR35, with more and more contractors worried about the Revenue’s dreaded letters falling onto their doorsteps. Accountants are handling a huge increase in HMRC enquiries in the recent months, all as a result of a recent crackdown on contractor tax avoidance dished out by HMRC.
With ominous pledges from the Revenue promising a tighter grip on the contracting community, we can already see that HMRC have been increasing their IR35 efforts rapidly. The tax office launched 256 IR35 enquiries in the 12 months from April 2012 – 13 compared with just 59 in the previous tax year (2011-12) and they have now set up a total of four IR35 teams tasked solely with enforcing the legislation.
People are now well aware that IR35 is here to stay. With the Revenue’s promises of an enforcement in combatting the legislation, many contractors are poised for more enquiries in the coming months.
IR35 is a growing concern for all UK-based limited company contractors. If you are concerned about your status, or simply want to discuss the legislation in detail, Qdos Contractor’s dedicated IR35 compliance team are here to help you. Call them on 01162690999 or email them on email@example.com