HMRC has recently disclosed, in a statement on its website, that it collected a yield of £1.1m in relation to IR35 enquiries that were closed in 2012/13 (including some that were opened prior to 2012/13). 85 cases were closed without any yield, i.e. no tax, NIC or penalties to pay. 256 new cases where IR35 was the primary risk, were opened in 2012/13. To put the number into some context, there are several hundred thousand contractors operating via limited companies in the UK, it is estimated.
However, HMRC attributes this improved yield to the new approach it has taken since April 2012, namely strengthening specialist teams and centralising enquiries within these teams, as well as closing cases faster and changing the way it profiles cases for risk and subsequent challenge.
Agencies Legislation Change
Unrelated to the above, and as a follow up to the Autumn Statement in relation to self-employed workers, HMRC have announced a change that will be made to the Agencies legislation. The change (to Section 44-47 of ITEPA 2003) will remove the use of the right to substitute a worker, as a basis for establishing self-employment. Any worker “working under the direction, supervision and control of a client” will be deemed to be employed, regardless of any right to substitution.
It is important to note that this is a change to the Agencies legislation, not a change to the IR35 legislation and that it clamps down on intermediaries and employers using them, that disguise the employed as self-employed to avoid both employer and employee NIC – it will not affect IR35-compliant contractors, legitimately working in business on their own account via personal service limited companies, nor will it affect those in working as employees through PAYE umbrella schemes. The change is estimated to net the Treasury more than £2bn over five years and will be included in the Draft Finance Bill.