HMRC have been talking tough with regard to tax avoidance for a number of years but do the numbers backup the hard talk?
Thomson Reuters data seems to back this up with an increase in the number of people being pursued through the courts for tax evasion being up almost a third in 2013/14 to 795 compared with the tax year before and is expected to rise to well over a 1000 for 2014/2015.
HMRC seem to be targeting tax evaders who fail to declare offshore income or gains. HMRC now need only to be able to show the money held offshore was taxable and undeclared as opposed to the old rules where the person holding the offshore income had intended to avoid tax.
HMRC are now also using criminal prosecutions which may have a deterrent effect on tax evaders.
Interesting figures have just been released from HM Revenue and Customs which show how many IR35 enquiries were raised for 2013/14 tax year and the corresponding amount of revenue they raised.
In total for 2013/14 tax year, there were 192 IR35 enquiries which yielded £430,000 compare this to the high point in IR35 enquires in 2002/2003 which yielded £946,275 from 1016 enquiries.
With such relatively small figures in comparison to the amount of taxes HMRC raise, you could ask why IR35 still continues to be in place?
Why does IR35 remain in place?
As your IR35 status is essentially self assessed, HMRC receive around £500,000,000 through people who voluntary assess themselves as being inside of IR35. Thus is IR35 was removed any Government would be about £500 million worse off, I feel IR35 might be around for a little while yet.
Does HMRC have the capacity to increase the amount of IR35 investigations?
There are currently four specialist teams of around 40 staff which can cope with running around 250 IR35 enquiries. It is estimated to properly police IR35 compliance by HMRC, HMRC would need around 3000 staff which is extremely unlikely to happen.