Inland Revenue Flexes Muscles Over IR35

by Jason Gorringe, Tax-News.com, London

10 December 2001

It was revealed by the UK website, Accountingweb.co.uk, last week that the Inland Revenue is stepping up its IR35 campaign, and has demanded information about independent contractors from many UK companies.

According to Gary Mackley-Smith, many major UK companies have been faced with TMA 1970 s.16 notices regarding independent contractors, and the increased administrative requirements have placed quite a burden on large organisations. One major plc revealed to Accountingweb's Tax Zone that it had been obliged to spend the better part of two days downloading data from its accounting department in response to the Inland Revenue's demands.

Section 16 notices concern the payment of fees and commissions, and were traditionally only ever used by the IR in connection with the film industry. However, as the government has stepped up its campaign against independent contractors, the Revenue appears to have widened the scope accordingly.

Although the increased compliance burden on major UK companies is clearly a concern, what is more alarming is that contractors will not be aware that their details have been sent to the Inland Revenue, and that the tax authorities hold a copy of the agreement between the contractor and the client company, until they receive an Enquiry notice.

'This is not a scare story. This is really happening,' a source whose company had received a Section 16 notice told the accounting magazine.

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