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The row over the use of so-called personal service companies by public sector and BBC workers has been further fueled when a leading tax expert has said that the perceived tax benefit may not be as great as people suspect.
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Freelancers have come in for possibly their biggest hammering in recent years, as the influential Parliamentary body, the Public Accounts Committee (PAC), has lumped them in with the tens of thousands of public sector and BBC workers who were operating through limited companies to avoid tax and NIC payments.
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The taxman has more than doubled the number of IR35 investigations last year and increased the yield from IR35 cases by five times in a clear sign that HM Revenue and Customs intends to get tougher with freelancers and IR35.
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After leaks, speculation and rumours, the Cabinet Office has now confirmed the arrangements that individual Government Departments will have to make when contracting with freelancers or renewing existing contract arrangements.
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Freelancers who work in the public sector are increasingly likely to fall under the new 'off-payroll provisions' or provide hard proof that they are outside them.
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Recruitment agencies are already reporting that the Government's tighter controls on the public sector use of 'off payroll' workers is having an effect on the public sectors ability to attract the best flexible resource.
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There has been much speculation about how HMRC's new approach to IR35 investigations with business entity tests and letters to freelancers would work in practice. Now, we have an example.
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A professional tax body has told the Government that it should use existing rules to deal with senior people working through their own companies for tax avoidance pruposes, rather than introduce new legislation.
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'That' question on the P35 relating to service companies and IR35 compliance is to be merged into one query with a legal requirement to answer - but that could bring more confusion rather than clarity according to experts.
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HM Revenue and Customs has streamlined its internal structure towards tackling IR35 compliance with the creation of three specialist teams and has confirmed that this focused approach has led to an increase in the number of reviews taken up by HMRC.
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