UK Contractors And Freelancers May Face More Tax Probes

by Robert Lee, Tax-News.com, London

06 April 2005

UK contractor services specialist Giant plc has warned that the government’s new consultation on removing red tape for small business may result in more frequent tax investigations for contractors, as the authorities lean on taxpayers categorised as “high risk”.

The government’s consultation document, entitled ‘Working towards a new relationship: a consultation on priorities for reducing the administrative burden of the tax system on small business,’ has suggested that to reduce the overall number of investigations on business taxpayers, more efficient targeting focusing on 'high risk' taxpayers may need to be introduced.

However, in a report for online freelance industry resource Shout99, Matthew Brown, Managing Director of Giant Group, expressed the belief that this will inevitably mean that contractors will bear the brunt of these investigations.

"With IR35 and then Section 660 it’s probably fair to say the Revenue classifies contractors as ‘high risk’. Contractors will be very concerned if the consultation document is suggesting that they may face more investigations in the future, not less," Mr Brown stated.

Giant is planning to make a submission to the consultation before the deadline at the end of June, in which the group intends to point out the increasing frequency and escalating cost of investigations into the freelance and contractor community. It will also urge the Revenue to cease arbitrary and random tax probes.

"When tax investigations are conducted entirely on a whim, the cost to taxpayers is completely unnecessary. If the tax authorities intend to continue with random investigations perhaps they should meet some of the costs," argued Mr Brown.

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