IR35 Risk Reviews

The “IR35” legislation, which has now been with us since 2000, was introduced as a means of taxing disguised employment arrangements as if they were employments.  Most commonly, it applies to individuals who work, essentially as an employee, of an organisation but supply their services indirectly through their own limited company.  When introduced, it was expected that it would raise significant amounts of revenue.  In reality it has raised very little tax.

In an attempt to try to introduce some clarity on the application of IR35 and to target their resources, HM Revenue & Customs (HMRC) are implementing a risk based approach to decide which businesses to investigate in detail to see whether or not IR35 applies to a business.  Guidance has been issued on how this risk will be assessed and HMRC have started to issue IR35 compliance letters to companies they have identified as potentially within the scope of IR35.

We have produced a paper that gives some of the background and the implications of HMRC’s appraoch – Resource