Agencies to be asked for contractors' details
On the day that the IR35 provisions were brought before Parliament for the last time, a press report suggested that the Inland Revenue is gearing up to ask agencies to reveal details of payments made to limited companies on behalf of clients as part of the IR35 crack-down.
It is expected that about 3000 employment agencies mainly those specialising in IT and engineering, will be approached soon, as the Revenue tightens the net.
Contractors will be asked to tick a box on the tax forms as to whether or not they consider themselves to be personal service companies. These two forms can then be cross-checked by the Revenue. It is reported that the Revenue estimates the average consultant will pay about £4,000 a year more in tax if they are caught by IR35.
The civil servant responsible for IR35, Sarah Walker, is reported as saying: "We mean to close a loophole that is costing the Exchequer £350 million a year and which means that often two people working side by side on the same short-term contract for the same company pay tax at different rates. Many consultants were not self-employed by a reasonable definition of the words even before IR35.
"Of 1200 contracts consultants have submitted asking us for a ruling on whether they fall within IR35 or not, 93 per cent were answered within our target of 28 days, and of these 53 per cent were judged to be within IR35, and 47 per cent not."
She added: "Since these 1200 contracts are likely to be the borderline cases anyway, I think this shows the Revenue is taking a balanced view".
The Inland Revenue told UKTECH that it expected the letters would go out in the next couple of weeks and that there had been no need for consultation on this aspect.
The IR spokesman said: "This provision has been introduced as an extension of the powers of section 16 of the Taxes Management Act 1970. We can bring these powers into effect under this section and therefore don't need to consult.
"The TMA is about how to manage to day-to-day practical matters of the Revenue. The agencies will therefore have to comply with it in the forms."
--
Susie Hughes