A leaked letter to ContractorCalculator has revealed that HMRC is asking for the personal details of any contractors working in the public sector who are continuing via their limited companies to work outside IR35.
The letter is now circulating to all public service bodies, requesting them to provide the names of addresses and of all their contractors who work through limited companies and are outside IR35. This is to ensure compliance with the Off-Payroll rules.
Dave Chaplin, ContractorCalculator’s CEO, said: “This appears to be another ominous sign that the Off-Payroll tax is nothing but a witch hunt against contractors. HMRC is evidently leaving no stone unturned in its pursuit of the few who have managed to secure fair tax treatment despite Off-Payroll.”
HMRC is not only seeking the details of contractors currently working via limited companies but also those who previously worked through a limited company and now have employment contracts. This is sparking fears that HMRC intends to pursue those individuals for back taxes.
Mr Chaplin said: “Contractors who have followed best practice and created a paper trail to prove their outside IR35 status shouldn’t have much to worry about. Although, given the approach that HMRC has adopted since Off-Payroll took effect, it likely will not prevent the taxman from sniffing around their affairs. HMRC is refusing to accept that its contrived rules are forcing contractors into ‘inside IR35’ arrangements and seems intent on interpreting instances where contractors have been forced to work under umbrellas as evidence of prior non-compliance with IR35.”
HMRC is also asking if its CEST tool helped determine employment status even though it is only supposed to be advisory, and there are concerns over its accuracy.