In HMRC, IR35

The idea of naming and shaming those who deliberately default on their tax responsibilities arose during last month’s Budget. This year’s finance bill will include legislation allowing HMRC to publish details about individuals and companies who have received a relevant tax penalty following an enquiry and if the tax loss is in excess of £25,000.

Odos Consulting have commented on what this could mean. They state that the circumstances resulting in a relevant tax penalty are:

· Taxpayer deliberately providing inaccurate information

· Taxpayer deliberately providing false information

· Taxpayer deliberately withholding information

· Taxpayer failing to notify HMRC

· VAT penalties for deliberate action

HMRC will be given permission to publish the person’s name and address. This includes the trading name, any prior names or pseudonyms, and the registered office. They can also make public the type of business this person is involved in. In order to shame the perpetrators, details of the amount of tax, interest, penalties and the period to which the default related will be released. HMRC will also be able to make public any other information which they consider to be appropriate in order to clarify the person’s identity.

HMRC will be required to notify the taxpayer before publishing their details and they will have the opportunity to make representations to HMRC. They will only be able to publish details after all appeals against additional tax and penalties have settled and within the 12 month period of the penalty becoming final. The lists will appear quarterly on HMRC’s website and will remain there for 12 months before being removed. Taxpayers will be given the opportunity to be spared from being named and shamed by making a full disclosure to HMRC of their defaults within a permitted timescale.

IF HMRC made a successful IR35 challenge for one or two years, it could conceivably result in a £25,000 tax loss. With the new penalty regime in its early stages it could be tricky to determine how Inspectors of Taxes will determine deliberate acts. Therefore a contractor could be facing the possibility of HMRC publicly naming and shaming them. The subsequent impact on a freelancer’s business could be detrimental.

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