IR35 probe worries from new tax forms

Posted on 8 May 2008

Comments

New questions on P35 forms are the subject of concerns that HM Revenue & Customs (HMRC) are "data-grabbing", Contractor UK.

On the forms, contractors are now asked if their employer is a "service company" and, "if so", whether they operate under MSC or IR35 tax laws.

The worries centre on whether or not these new questions are aimed at isolating taxpayers who provide services through MSC and IR35 and those who do not.

In theory, HMRC could use the questions to launch an MSC or IR35 investigation to check on the veracity of the data provided by contractors - and, potentially, demand retrospective payments.

Adding to the complexity of the situation is the ambiguous definition of "service industry", Roger Sinclair at legal advisers Egos said.

"It asks if the company is a 'service company' - but there is no clear meaning or common understanding, let alone statutory definition, as to what a 'service company' actually is."

"What will the Revenue do if you answer ' yes' to the first part and ‘no’ to the second?" Mr Sinclair added.

"Will… [the answers] be used by HMRC to determine which limited companies require further investigation?"

Category: IR35

• Save to del.icio.us
• Digg this story