Agency to provide HMRC with quarterly updates on personal service companies

[Qdos Contractor]

The idea of HMRC using the data to find IR35 targets is speculation. It's a reasonable concern, but speculation all the same.

Obviously the reason this is happening is because of the false self employment legislation, which is ostensibly aimed at sole trader types working through agencies (construction workers etc). Unfortunately HMRC are using the standard sledgehammer approach and limited company contractors are being caught in the crossfire.

A probably consequence of both the false self employment legislation and the government's apparent dislike of umbrella companies is that more and more people will herd into PSCs. If that happens I wouldn't be surprised if both IR35 and MSC activity was stepped up significantly.

[Zero Liability]

It could happen but I wouldn't be surprised if the FLC suddenly resurfaced in discussions in the not too distant future, as IR35 is cost-prohibitive.

[BlasterBates]

I suspect that this is more of an information gathering exercise on the back of the new legislation to better judge how much potential tax or NIC there is to collect and then to consider alternatives how to increase it, which will in any case will depend on who is the new government.

[jamesbrown]

I agree with QDOS that we are collateral in this exercise, which is why the precise reporting requirements are so opaque. This wasn't aimed at Ltd company contractors operating IR35, but when the question arose, they certainly weren't going to eliminate that potential avenue for future enforcement, despite noises to the contrary early on This needs to be viewed in a broader enforcement context across all types of agency arrangements, as will become clear in the coming months and years (cough. FLC. cough). Where I differ with QDOS is over the implications for use of Ltd companies, as I think it will have the opposite effect on contracting; also, while IR35 has worked for HMRC, it remains expensive to operate as an enforcement mechanism and relies heavily on deterrence. There are powerful arguments for tax simplification in the longer term, but it won't be pretty in the interim.