Last updated: 12 Nov 2024 10:00 Posted in:
The number of IR35 tax investigations by HMRC is set to rise significantly under the Labour government, leading law firm has warned.
Pinsent Masons’ HR expert Penny Simmons said HMRC is increasingly focused on IR35 compliance and enforcement, and businesses that utilise a large number of contractors and have complex supply chains are most exposed to risk from an enquiry.
She said a letter from the Revenue asking for IR35 tax-related information might not strike the recipient as important, but a lack of response or a rushed reply can, in the worst case, give rise to a full-scale investigation by the tax authority.
She said: “This warning is really around letters that are being received from HMRC. Now, these letters are coming in and often they're badged up as ‘contingent workforce audit’, simple questionnaire, friendly email.
“Often they form the guise of a letter that says the Revenue is looking to understand how businesses are complying with IR35 and managing IR35. So they're just looking for information almost for research purposes and I guess the health warning there is if ever someone from HR, if one of those letters, in whichever form it takes, or emails, lands on an HR manager’s desk, check in with your legal team, check in with your tax team, as to how to respond.”
The Chancellor Rachel Reeves has set a target of raising £5.1bn per year by the end of the next parliament through new investment in HMRC. The plan includes a commitment to new funding of up to £555m for the Revenue to employ more staff, bolster its investigations team, and modernise its systems.
At the Labour Party Conference in September, as the FT reported at the time, she said as part of her plan to fill the £22bn black hole in the public finances she would clamp down on tax evasion, and that the government was already recruiting 5,000 new HMRC compliance officers.
