IR35 Reform

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Freelancers face tax scrutiny

Proposals to revise the IR35 rules against “disguised employment" mean companies that use freelancers would be required to police their tax affairs.

The planned shake-up would require anyone using a worker through a personal service company to consider whether IR35 applied and, if so, deduct the correct amount of income tax and national insurance from their pay.

Plans for the shake-up were announced in the Budget, amid HMRC"s concern the current system is failing to halt the avoidance of hundreds of millions of pounds a year.

HMRC said it expected to lose £430m in tax and NI receipts this year from non-compliance with the IR35 rules. The Revenue estimates that nine out of ten of those who should comply, do not. In 2011-12, about 10,000 people paid tax under IR35 and the number has changed little since the rules were introduced say Harris & Co, chartered accountants Northampton

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