According to HMRC, in the tax year 2012-2013 the number of IR35 investigations soared to the highest number of enquiries within a 12 month period for seven years, reaching 256 in total.
In the tax year 2011-2012 numbers were more than four times less than this, highlighting just how far HMRC has taken its initiative to clamp down on compliance.
When looking back at IR35 enquiry trends, a cyclical pattern seems to emerge. That is, HMRC boosts investigations rapidly and then cools off again. Could this pattern be taking form for 2014? HMRC's data pinpointed that in the first six months of the 2013-2014 tax year, enquiries raised are 112 compared to 193 at this point in the 2012-2013 tax year.
Despite the dip, HMRC remain committed to targeting high risk cases, specifically those PSCs whereby every assignment is within IR35.
So how do you know whether you fall in or outside IR35? In simple terms, IR35 is looked at on an assignment by assignment basis and states that only contractors 'genuinely in business on their own account' can draw dividends from their limited companies. So, if you act and are treated like an employee, you should pay tax in the same way as an employee.
How can PayStream help?We offer a free IR35 review to all our limited company contractors and anyone looking to join our limited company services, to ensure you go down the road that is most suited to your needs. For more information please click here.