IR35 came into force in July 2000 to tackle 'disguised employment'. Generally speaking, where you work in the same way as an employee of the client, you should pay broadly the same tax and national insurance contributions (NICs) as that employee. IR35 considers the underlying nature of your working relationship with a client.
Despite calls for IR35 to be scrapped, it seems as though IR35 is here to stay. When a House of Lords committee looked into the use of PSCs, HMRC estimated that the risk to the Exchequer of abolishing IR35 was £475m, which was later amended and increased to £550m.
In 2012-2013, the number of IR35 related enquiries jumped to 256, with a yield of £1.1m. In 2013-2014 however, the number of enquiries dropped slightly to 192, but the yield fell dramatically to £430,000. Caution should be applied before celebrating these figures since HMRC's IR35 department is resourced to manage 250 enquiries at any one time and of the 192 cases, we don’t know how many cases are still ongoing.
That said, it's important that you continue to take advice on IR35 at the start of every assignment and at regular interviews thereafter. If HMRC decides to raise an IR35 enquiry, it's much more difficult to respond if you haven't taken advice at the time. For example, it may be difficult for you to remember 'what went on' if the assignment ended a year ago and to find all your related evidence and paperwork.
Whether you are currently using our service or know someone who isn't but would benefit from our advice, our Compliance Team are on hand to help. You can view more information about our IR35 review service here, alternatively email us at IR35@paystream.co.uk.