More than 2000 public sector workers are being investigated over allegations that they have been paid through their own private companies in order to reduce their tax bill. The scandal is under investigation to determine whether the officials are self employed or whether they fall foul of the IR35 rules and are in fact employees.
It is interesting to note that a number of these schemes were declared to the HMRC at the time they were set up and have received HMRC approval.
The implications of this scandal are significant to the accountancy industry. We are advising clients to review their IR35 position with their accountant as the HMRC will be targeting small Limited Companies with only one director. The penalties for non compliance can be significant, particularly if backdated over several years.