HMRC has released confirmed that IR35 investigations rose substantially during the year 2012-2013, resulting in a tax yield of £1.1 million.
The increase comes in the wake of Revenue consultations with the IR35 Forum, which led it to pilot specialist teams with centralised IR35 enquiries from April last year. Whereas the number of IR35 enquires opened by HMRC stood at 59 in the year 2011-2012, by the following year the number had soared to 256.
The new approach, the Revenue claims, is enabling it to establish the facts far more quickly than previously and to rapidly close low-risk enquiries. 85 of the enquiries opened in 2012-2013 were in this category and were quickly closed with nil results. Many of the remaining cases were closed within just three months as a result of increased customer co-operation with the new approach; not one of the cases took more than 12 months.
Responding to the data, APSCo’s head of external relations, Samantha Hurley, said that her organisation welcomed the opportunity to work with the Revenue and was “greatly encouraged” to see the government displaying clearer understanding of genuinely self-employed independent professionals who were contracting through personal service companies.
Ms Hurley continued: “We are pleased that HMRC is constantly reviewing its guidance to ensure that any measures introduced are targeted at the right areas. It’s crucial, however, that HM Treasury focuses on giving legal certainty to the millions of SMEs out there. At the moment few tax advisers can say with certainty whether SMEs fall into the provisions of IR35 or not.”