Tax avoiders and evaders alike have cause for concern as Her Majesty’s Revenue and Customs have dedicated £1billion – a quarter of the Budget – toward enforcement of the rules and coming down hard on those who break them. The investment is estimated to return a £2.4bn profit to HMRC.
However, even law-abiding and tax-paying contractors may have reason to worry, as the threat of investigation becomes much more of a reality. Limited company contractors are urged to ensure their business lies outside of IR35, and that all their tax affairs, dividends, payments, expenses receipts and other paperwork is fully in order.
The Professional Contractors’ Group told Contractor UK: “It’s legitimate for HMRC to enforce the law; our concern is that they tend to do it very badly, with destructive repercussions for innocent taxpayers.”
In an effort to end the out-of-court settlements, HMRC has pledged to pursue their cases through the courts until receiving whatever they feel is owed them. Also scheduled for application are new IT tools, expertise and penalties to identify and punish the guilty. IR35 adviser Bauer & Cotrell warned that IT contractors who fail to make their appeal after paying the tax demand following an investigation may be promptly blacklisted by the HMRC.
Contractors using offshore solutions should be especially careful, as many tax loopholes and avoidance schemes are targeted for elimination in accordance to the new HMRC business plan, which also promises to simplify existing anti-avoidance laws.