IR35 enquiries are on the increase

Tuesday 23rd October, 2012
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Industry news

Off-payroll arrangements in the public sector remains in the spotlight this month following the release of a report by the influential Parliamentary body, the Public Accounts Committee (PAC). The report writes of the importance of the public sector showing leadership in the fight against tax avoidance and makes a number of recommendations in how to better achieve this.

If you are a PSC contractor working in the public sector, this article is particularly relevant to you. The PAC is maintaining that off-payroll arrangements are not appropriate to those in management positions or those that work for a significant period with the same client.

Conclusions and recommendations

  • In the Treasury Review Report May 11, the Treasury said there may be exceptional circumstances' whereby use of an off-payroll arrangement, including a PSC may be appropriate. The Report did not however clarify what constitutes exceptional circumstances' and the PAC now recommends that it should be defined as requiring a client to seek Treasury approval of any such exceptions and that information is passed onto HM Revenue & Customs (HMRC).
  • The deterrent effect of IR35 has been placed at risk by the reduction in the number of HMRC investigations. In last month's article we wrote about the increasing number of IR35 enquiries expected. The PAC has asked HMRC to set an optimum number of IR35 investigations that maintains an effective deterrent and HMRC plans to increase the number of IR35 investigations 10-fold in the next year.

The PAC also concluded:

  • Too many public sector staff have been paid off-payroll for too long.
  • The appointment of the Chief Executive of the Student Loans Company through a PSC should have been challenged.Further research is needed to assess the use of off-payroll arrangements beyond central government.
  • The BBC has identified 25,000 off-payroll workers and has little knowledge on their tax arrangements.
  • The public sector should address and rectify its dependence on interim contractors and improve its in-house specialist and professional skills.

Our advice

In light of HMRC's plan to significantly increase the number of IR35 enquiries this year, whether you work in the public or private sector, we strongly recommend that you seek IR35 advice at the beginning of every new assignment and at regular intervals during an assignment. PayStream's Compliance Team is ready to provide advice and answer any questions. Please get in touch with us through your Personal Accounts team or directly by emailing contractservices@paystream.co.uk.



The PAC has asked HMRC to set an optimum number of IR35 investigations that maintains an effective deterrent and HMRC plans to increase the number of IR35 investigations 10-fold in the next year.