IR35 Reform

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