IR35 investigations 'could rise'

Date: 23rd September 2009

HM Revenue & Customs (HMRC) is likely to target limited companies later this year as it seeks to improve compliance with IR35 legislation, new analysis suggests.

Kate Cottrell, an ex-tax inspector turned taxation adviser, believes that contractors will prove a "target-rich environment" for inspectors, Contractor Calculator reported.

She added that the crackdown could come as the UK Treasury looks to make changes to taxes as it attempts to limit public debts.

Reduced corporation tax, VAT and capital gains tax revenues in the credit crunch and recession are likely to lead the government to run up a deficit of £175 billion this year, official forecasts show.

This year's Budget unveiled plans to increase income taxes for people earning £150,000 or more - and further increases are likely to come whichever party wins the next general election, which must be called by mid-2010.

Ms Cottrell told the news source: "My fear for contractors is that the last 18 months of low levels of HMRC activity on IR35 have been the calm before the storm, and that we will see limited company contractors increasingly under the spotlight as the Treasury seeks to raise taxes."

She added: "Contractors can ensure that an investigation is quick and painless by getting their contracts checked and asking their client for a confirmation of arrangements. Plus, it is essential to have expert representation who can deal with HMRC on a contractor’s behalf."