Tax & IR35 News

Tax and IR35 are both extremely important, ever changing concepts to both contractors and professionals alike. IR35 and Tax issues are continually shifting and advancing, and Contractor Weekly aim to provide contractors with the latest, most relevant contractor news from across the nation.

Airbnb Tax Free Cash?

airbnb websiteLand Tribunal ruling casts doubt over sub-letting

Since Airbnb was launched in 2009, many have jumped at the opportunity to let their properties to complete strangers and earn themselves some tax-free cash from doing so. This has been made more attractive since the Rent-a-Room threshold was increased from £4,250 to £7,500 from 6th April 2016.

Bridging the Gap

HMRC tax gap estimates 2014/15

HMRC has recently published its tax gap estimates for the previous tax year 2014/15, Measuring tax gaps 2016 edition, which approximates the gap to be £36 billion, 6.5% of theoretical tax liabilities.

TAAR, do your conditions apply?

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Liquidation and phoenixism

Budget 2016 introduced measures to counter phoenixism, the practice of carrying on the same business or trade successively through a series of companies where each becomes insolvent in turn. Each time this happens, the insolvent company’s business, but not its debts, is transferred to a new, similar ‘phoenix’ company. The insolvent company then ceases to trade and might enter into formal insolvency proceedings (liquidation, administration or administrative receivership) or be dissolved.

PAYE Penalties

Reminder to employers about late filing penalties

HMRC’s latest Employer Bulletin provides a timely reminder about PAYE late filing penalties.

The Quarter 1 late filing penalty notices were issued last month and continue to be issued on a risk assessed basis. A penalty will not be charged for delays for up to three days after the statutory filing date. HMRC will however contact employers who persistently file after the statutory filing date but within three days, and they risk being considered for a penalty.

100 BBC Presenters Under IR35 Enquiry

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It has been made public knowledge that approximately 100 current and former BBC presenters are currently under IR35 enquiry. The revelation came during a recent First Tier Tax Tribunal hearing involving BBC news presenters Tim Willcox and Joanna Gosling who operate through their own personal service companies, Tim Willcox Ltd and Paya Ltd.

Simple Steps to Tax Efficiency in 2016/17

Individual taxpayers are afforded a number of allowances that enable them to receive income in their hands tax-free and by structuring your affairs it is possible to keep HMRC’s hands off just over £23K of your hard earned income.

Are the benefits of contracting under attack?

The government announced in October 2016 that a top level review would look at employment rights and practices affecting some six million workers, including the 1.7 million strong army of contractors. The man whose mission it is to examine the current status quo is Matthew Taylor, current CEO of the Royal Society of Arts and former adviser to ex-labour leader, Tony Blair.

We examine the proposals, and consider the implications for contractors of what Prime Minister Theresa May referred to as “keeping pace with the changing world of work”.

IR35 Case Study - Luck of the Draw

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As IR35 specialists who have been defending contractors for the best part of two decades, we have dealt with a number of different HMRC status inspectors in our time, explains Qdos Contractor.

Claiming Entrepreneurs’ Relief

Pay attention to the detail when claiming Entrepreneurs’ Relief

Once a contractor has decided to call time on their company there is the important matter of getting their hands on what remains left in the company, which is normally a large pile of cash – hopefully. This can either be extracted as a dividend or as capital. With dividend taxation rates reaching as high as 32.5% for higher rate payers and 38.1% for additional rate payers, the attraction of treating the final distribution as capital, claiming Entrepreneurs’ Relief (ER) and paying Capital Gains Tax at a rate of 10% will be rather more appealing.

More third party debt transfer

HMRC consults on penalties for VAT fraud

As part of measures to crack down on VAT fraud HMRC are proposing a new penalty which could be collected from company officials. This increasingly favoured method of punishment is suggested in HMRC’s recent consultation titled, Penalty for participating in VAT fraud.

APNs – more where they came from

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£3 billion collected already by using Accelerated Payment Notices

HMRC have now laid their hands on £3 billion up front from those involved in tax avoidance, through the use of Accelerated Payment Notices (APNs).

No Sunshine in Cyprus

HMRC issue warning over CGT avoidance scheme

HMRC have issued a warning to taxpayers not to use an avoidance scheme which takes advantage of Capital Gains Tax Entrepreneurs’ Relief (ER), that turns income into a capital again thereby avoiding income tax and NIC.

MTD delay may not be enough

Treasury Committee warning to Chancellor over Making Tax Digital

Whilst HMRC have agreed to delay the introduction of MTD (Making Tax Digital) until 2019 to provide further time for larger businesses to adjust, Andrew Tyrie, Chairman of the Treasury Committee, has said that this may not be enough.

Small businesses struggling with RTI

HMRC keen to learn why PAYE errors occur

Real Time Information (RTI) has been an integral part of the PAYE landscape now for over 3 years although the rules were relaxed for micro-employers, ie those with up to 9 employees, until April of this year.


Autumn of discontent for contractors

With the date for the Autumn Statement now set for 23 November, chancellor Philip Hammond will want to steer a steady course for post-Brexit Britain.

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The big question on contractors' lips is, 'How will the public sector IR35 reforms affect us and the industry moving forward?' We present the facts and the potential fallout from the draconian new rules.

Director escapes company's PAYE debt

HMRC unable to pin SME's tax and NIC debt on its director


HMRC are increasingly looking to legislation contained in Reg. 72 Income Tax (PAYE) Regulations 2003 and Reg. 86 Social Security (Contributions) Regulations 2001 that enables PAYE tax and NIC debts to be transferred to the employee in specific circumstances.

Delay in proceedings for SME's

MTD put back a year

Following concerns about the ambitious timetable for implementing MTD (Making Tax Digital), HMRC have delayed its introduction until 2019 to allow businesses more time to prepare and adjust.

Agency Returns: How are you finding it?

Are agencies coping with new reporting requirements?

Agencies and other employment intermediaries have now had to file quarterly returns for all those workers engaged on a self-employed basis, for nearly 1 ½ years now. To enable HMRC to understand how agencies are dealing with this and their awareness of what is required and the associated penalty regime, the department commissioned a qualitative research study. This study, which involved 60 in-depth interviews with employment intermediaries, examined:

IR35: Still not right

OTS response to proposed IR35 reform in public sector

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Whilst we await the next step following the end of the consultation process of reforming IR35 within the public sector, the Office of Tax Simplification (OTS) have published their response to the Government’s consultation document, Off-payroll working in the Public Sector:Reform of the Intermediaries Legislation.

Like many critics of these proposals, the OTS are not convinced that they will simplify matters but rather add complexity by:

Guilty by association

All involved in tax avoidance schemes will be penalised

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HMRC has recently published a consultation document, ‘Strengthening Tax Avoidance Sanctions and Deterrents: A discussion document’ which proposes sanctions aimed at everyone involved in the birth of tax avoidance schemes which are defeated by HMRC. This follows the government’s announcement at Budget 2016, that it would explore options to introduce negative consequences for those who enable tax avoidance.

New penalties for a new age

HMRC suggest penalty points system for Making Tax Digital

HMRC’s vision for transforming our tax system into a more effective, more efficient and easier one for taxpayers, ie Making Tax Digital (MTD), will inevitably require changes to the way tax is administered.

Volunteering to pay tax

HMRC consult on pay as you go

As part of the Making Tax Digital project, HMRC are looking at a voluntary pay-as-you-go (PAYG) arrangement that would give businesses the opportunity to budget towards their tax bills.

Public sector turn their noses up

HMRC’s planned IR35 reform cuts no ice with public sector

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The Government’s consultation on IR35 reform in the public sector closed last week but it appears that it is not just the contracting community who are opposed to the proposals.

Phone’s off the hook but you’re not

Poor telephone service pays dividends for taxpayer

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HMRC failed to make a VAT penalty stick in a recent First Tier Tax Tribunal hearing, McNamara Joinery Ltd v HMRC, because of its woeful telephone service.

Salary sacrifice at the altar

Government to restrict practice of giving up salary for benefits

Following the Budget 2016 announcement that the government would consider limiting the range of benefits that attract income tax and NIC advantages when provided as part of a salary sacrifice arrangement, a consultation document has now been released: Consultation on salary sacrifice for the provision of benefits in kind.

IR35: How to ensure you are operating compliantly

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With 4 specialist IR35 teams committed to tackling 250 enquiries at any one time, IR35 experts Qdos Contractor, are holding a live event on 31st August to tackle the most common question when it comes to the IR35 legislation – how do I ensure I am operating compliantly?

Penalties now automatic for employment intermediaries

Late returns incur immediate fine

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Employment intermediaries have, since April 2015, had to file returns detailing those whom the intermediary believes it has a legitimate reason for engaging workers on a self-employed basis.

Limited liability for sole traders

OTS examine merits of the Sole Enterprise with Protected Assets

The Financial Secretary to the Treasury has given the Office of Tax Simplification (OTS) the green light to further explore a Sole Enterprise with Protected Assets (SEPA) model, which would provide protection for one or more assets of a self-employed individual.

Full steam ahead

Government confirm commitment to IR35 reforms in public sector

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The consultation document, ‘Off-payroll working in the public sector: reform of the intermediaries legislation’ is due to close on 18th August but the Government have made it clear that their proposed reforms will go ahead in April 2017 as planned.

MSCs in the spotlight

HMRC warn of the perils of being a Managed Service Company

Capitalising on its recent success in the First Tier Tax Tribunal ruling in Christianuyi Ltd & Others, HMRC has published Spotlight 32 ‘Managed Service Company legislation – tax avoidance scheme involving unpaid PAYE and Class 1 NIC’

Are Umbrella companies still relevant?

Temporary workers need to consider their arrangements

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The Low Incomes Tax Reform Group (LITRG) is urging workers to consider their relationship with Umbrella companies carefully, particularly as the key advantage of travel expenses has all but been closed off.

Companies through the looking glass

Is lookthrough taxation viable?

Earlier this year, the Office of Tax Simplification (OTS) made a number of suggestions on how to simplify tax for micro businesses, in their ‘Small Company Taxation review.’ The report contained the idea of a lookthrough taxation model which the OTS want to develop further and, with this in mind, have recently published a discussion paper inviting comments by 12th September or 30th September by the very latest.

HMRC’s IR35 status tool ‘doomed to fail’ says industry expert

HMRC is trying to achieve the unachievable in its bid to develop a comprehensive online IR35 test that provides a definitive result for each user. This is according to contracting expert Dave Chaplin, founder and CEO of ContractorCalculator.

Reforming IR35

End users want no responsibility for IR35

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One of the options for reforming IR35 mentioned in last year’s discussion document was for engagers to take on more responsibility for ensuring that the right amount of employment taxes are paid. End clients would therefore take a more active role and would have to consider whether or not IR35 applied to the engagement.

It never Raines, it pours

Shareholding mix-up costs taxpayer over £41K

Confusion about who held shares in a PSC ended up costing Terence Raine £41,540 in tax and penalties.

Your View: Public Sector Guidelines

Public Sector Survey Results

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Public sector guidelines are under the spotlight again for the fourth year running. The most recent developments - pencilled in to be applied from April 2017 -  which puts the engager (or agency) in control of the contractors’ IR35 future - are clearly cause for concern and not just for public sector contractors, but possibly for all private sector contractors too (as suggested in the IR35 consultation last year).

Philip Hammond and IR35

What can contractors expect from Philip Hammond? While his predecessor triggered a wave of change for public sector contractors following the 2016 Budget, what do we know about our new chancellor of the exchequer, and his stance regarding IR35 and the contracting industry?

IT consultant imprisoned for tax fraud

Tax cheat sent down for tax and child support dodging

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Hamauon Khan, an IT consultant from Crawley received a prison term of four years for avoiding paying tax of more than £170K.

HMRC floored and flawed

Tribunal not impressed with HMRC’s stubbornness

It was another bad day at the office for HMRC as they lost another appeal at the First Tier Tax Tribunal, this time over their refusal to suspend a penalty of a few hundred pounds in respect of a careless error made on a personal tax return.

When does TAAR stick?

Institute of Taxation’s concerns regarding company distributions 

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Finance Bill 2016 introduced a new targeted anti-avoidance rule (TAAR) for certain distributions of share capital made on winding up a company.

For those freelancers who close their company and restart another soon after, mainly for IR35 reasons, they will run into difficulties because of the TAAR which will treat a distribution from a winding-up as if it were an income distribution, rather than capital subject to more favourable taxation, where certain conditions are met:

Always in the bag

Does HMRC’s left hand know what the right hand is doing?

Over recent weeks HMRC have lost a number of First Tier Tax Tribunal appeals due to their procedural ineptitude, and just when they thought it couldn’t get any worse, it did!

Tax return immune from enquiry

Tax return sent to wrong address cost HMRC thousands

A 2008/09 self-assessment tax return that was sent to a wrong address led to HMRC missing out on £16.5K in income tax following a recent First Tier Tax Tribunal ruling.

Farewell annual return

Companies House filing changes affecting small companies

The Small Business, Enterprise and Employment Act 2015 introduced a number of procedural compliance changes for companies, some of which came into being last year, with others being introduced this year.

Room for hire

Get the documentation in place

Many contractors operate their company’s business out of their own home and use at least one room in the house as a dedicated office.

Overdue PAYE refund trumps VAT penalty

HMRC tardiness provides escape from surcharge

HMRC’s delay in repaying overpaid PAYE to a business, handed the taxpayer a reasonable excuse for a slight late payment of VAT, the First Tier Tax Tribunal ruled.

HMRC’s IR35 public sector consultation

Have your say

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Contractors working in the public sector may face draconian new rules from April 2017 if the recommendations in HMRC’s latest IR35 consultation come into force. Agencies with public sector contractors will become responsible for determining their freelancers’ and contractors’ IR35 status. The concern is that risk-averse engagers will simply apply IR35 by default, leaving public sector contractors with a tough choice – leave their contract or take a significant pay cut.

Flat rate VAT and IR35

How to treat VAT in the IR35 calculation

The VAT flat rate scheme (FRS) was introduced on 24th April 2002 and provides many contractors with an easier way to administer their company’s VAT affairs. Provided a business is eligible to use the scheme, then the amount of VAT it pays over to HMRC is based on a fixed percentage of its VAT inclusive sales. VAT of 20% still has to be charged on the businesses sales but FRS avoids the need to record and reclaim the VAT it incurs on its expenses. Any difference between the VAT charged on sales and the amount of VAT paid is pocketed by the business but what happens to that income where a contractor is caught by IR35?

Fatal error proves very costly

HMRC lose out on £653K due to mistake

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One erroneous digit on a tax enquiry notice cost HMRC very dear after the First Tier Tax Tribunal ruled their notice to be invalid.

The quality of service is strained

HMRC underestimated effect of staff cuts

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A recent report titled, ‘The quality of service for personal taxpayers’, compiled by the National Audit Office (NAO), confirms that it is no coincidence that the collapse of HMRC’s service to individual taxpayers occurred after the department shed some of its staff.

Online tax returns – common mistakes

Error messages when using HMRC software

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For those using HMRC’s own software to file their 2016 tax returns you need to be aware that the Revenue are currently trialling some changes. HMRC have identified 21 of the most common mistakes made in online returns and to address these the department has created three different types of messages to help taxpayers and reduce potential errors.

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