Surge in number of IR35 investigations since April 2012
The House of Lords Select Committee on Personal Service Companies met on 25th November, and revealed some interesting facts related to the use of limited companies, and the effectiveness of IR35.
Rowena Fletcher from HMRC estimated that there are around 200,000 PSCs in operation currently – the same as in 2010. Substantially more than the 90,000 which were being used in 1999 before IR35 was introduced. This, the Committee was told, was due to the evolution of the labour market over the past decade, as well as tax considerations.
HMRC estimates that the potential loss to the Exchequer if IR35 were to be removed would be around £475m – the direct taxes collected as a result of IR35, plus the ‘deterrent effect’ of the legislation.
Fletcher also revealed that HMRC had opened 256 fresh IR35 enquiries in the 12 months following the ‘overhaul’ in IR35 administration in April 2012. This represents a more than four-fold increase in the number of IR35 investigations opened.
Encouragingly, the average time taken to conclude an IR35 case has fallen from up to 140 weeks to a mere 28 weeks in the period starting April 2012.
You can read the full minutes from both sessions of the Committee hearings here (the next session is due to take place on December 2nd).
There’s more to life than money for umbrella contractors
That’s the key finding from a client survey carried out by Parasol this month.
According to the study, Parasol’s umbrella clients are motivated more by ‘lifestyle’ considerations than merely money.
When asked what was the best thing about being a career contractor, a mere 29% said that ‘earnings potential’ came in at number one. Freedom was cited by 38%, the variety of work on offer followed on 21%, and the ‘work-life balance’ came in at 12%.
The importance of financial rewards did vary between industries – with contractors working in the media / creative / digital industries far more likely to cite lifestyle reasons for contracting than those in more traditional industries (such as engineering and IT).
Contractor UK Awards 2013 – voting open shortly
Voting for Contractor UK’s annual awards opens on Monday 2nd September.
As ever the awards will establish which are the best umbrella, accountancy and recruitment firms, according to the views of the site’s substantial readership.
You can cast your vote across 11 different categories until December 20th, and the winners will be announced very early in 2014.
Find out more here.
Drop in number of new tax avoidance schemes
As a result of the Government’s concerted efforts to clampdown on artificial tax arrangements, the number of new tax avoidance schemes reported to HMRC has fallen significantly over the past year.
According to figures released by law firm Pinsent Masons, the number of new schemes reported under the Disclosure of Tax Avoidance Schemes (DOTAS) programme during the year ending 30th September 2013 stood at 77, down over a third on the 121 notifications submitted in the previous year.
Since 2004, the promoters of certain types of tax avoidance scheme are legally obliged to register their businesses to HMRC via the DOTAS programme.
Find out more here.