Since HMRC published their Business Entity Tests a few months ago many outlets have been reporting a noticeable upswing in IR35 enforcement activity from HMRC. As with all things IR35-related raw figures have been hard to come by – until recently, when the PCG published a report from Abbey Tax stating that IR35 investigations had increased “a hundred-fold” since May, equating to more than 2,000 new investigations.

Responding to the rather alarming claim, HMRC issued a response, saying the report was “misinformed” and that “the figure is not correct.”

Faced with claims of scaremongering in an attempt to help Abbey Tax sell their IR35 insurance products (coincidentally, an independent tax advisor recently accused the IR35 insurance industry of doing just that), the PCG has been attempting to distance themselves from the claim. A spokesperson told us:

“PCG does NOT believe 2,000 IR35 enquiries have been started since May 2012.  That view and that figure came from Abbey Tax, an independent organisation, in a PCG newsletter. It was clearly stated in the newsletter that this was the view of Abbey Tax.

“As members of the IR35 Forum, PCG is kept well informed of HMRC’s activities in this area.  It is our understanding the number of enquiries is substantially less than the 2000 claimed by Abbey Tax.”

The offending article has also disappeared from the PCG’s website in the last few days. When asked why the PCG would publish an article including such an incendiary estimate which they believed to be false, the PCG told us:

“Opinion pieces may not necessarily reflect PCG’s official view on the topic in question. We do not agree with the estimate the author of the article has made.”

Industry website Contractor Accountants even went so far as to suggest the PCG and Abbey Tax could face claims for the mis-selling of insurance if they cannot back up the figure.

We spoke with Paul Mason of Abbey Tax, who provided the guest piece to the PCG. Mr Mason says the figure is in reference not to full-blown IR35 enquiries, but to IR35 status letters being sent out by HMRC, and that the “hundred fold increase” is in line with the recent increase in interest in Abbey Tax’s IR35 insurance products. He also points out that with 36 HMRC officers manning the IR35 task force, each with a workload of around 30-40 cases, a figure in the thousands is by no means excessive.

Our take? All a bit of a storm in a teacup. Regardless, with their headline annual event National Freelancers Day just around the corner, the PCG will be looking to put this latest controversy behind them as quickly as possible.

Photo by Red Rose Exile