Revenue to toughen up on Self Employed

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The Government has called for tougher measures on those registering as self-employed in order to avoid paying more income tax.

Fri, 27 Apr 2012

Inland Revenue to launch tougher checks on the self-employed In February Student Loans CEO Ed Lester was added to the payroll forcing him to pay tax and National Insurance contributions after it was revealed that he saved £40,000 a year in income tax by being paid through a private agency, a move initially supported by Government ministers.

Following last week’s budget, those registered as self-employed are now under scrutiny as Inland Revenue launches tougher checks. Many high earners are currently being paid through their own Personal Service Company in order to avoid paying income tax on their earnings. Instead they pay the much lower rate of corporation tax.

Under the Intermediaries Legislation IR35, freelancers are described as having multiple sources of income and no fixed employment, but there is still no official definition of a ‘Personal Service Company’.

Freelancing body PCG has criticized the Government’s lack of clarity in the matter. “PCG would have liked to have seen the Government publically expand on the plans for “making IR35 easier to understand” as the detail is crucial for freelance businesses” says John Brazier, PCG managing director.

Industry experts have claimed that this lack of definition has allowed HMRC to use IR35 to their own benefit as these reviews may lead to interest or penalties for those involved.

In a recent response to a freedom of information request by MP David Mowat the BBC has admitted to having 3,000 self-employed staff not including the number who are exempt from responding to FOI requests. The Guardian reports that this includes 41 who annually earn over £100,000. A BBC spokesman has said that all tax arrangements are dealt with by the individual in line with HMRC legislation.