A review of evidence by contractor insurer Qdos concerning HMRC’s recent IR35 activity has concluded that investigations are rising again and more contractors are finding themselves under scrutiny.

If ever there was a time to pursue a contracting career as an Umbrella Company Employee, this could be it. Although effectively freelancers, contractors who work through Umbrella Companies pay tax and NICs automatically on a PAYE basis; as such, they are considered as employees by the taxman and safely outside IR35.

Experienced IR35 consultant Kate Hardy warned: “Most of the enquiries we’re defending are ones where the contractor has no insurance and with those clients they’re having to pay on an hourly consultancy rate rather than being able to rely on an insurance policy to cover all of these costs.”

Former Revenue inspector and IR35 expert Andy Vessey told Qdos that he had not only seen an increased number of IR35 investigations being taken up over the last few months but also an increased scope: the taxman has cast the IR35 further afield than the public sector, where it had previously been concentrating its efforts.

Mr Vessey also said that although the Revenue had promised two years ago to close down enquiries promptly upon collecting sufficient, satisfactory evidence ‒ a promise it had kept over the last 18 months ‒ this is now changing.

“I am now seeing signs of HMRC slipping back into their bad old ways of prolonging enquiries unnecessarily. Certain status inspectors are now digging their heels in and their actions appear to be premeditated,” Mr Vessey explained.

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