There were 256 investigations into people HMRC suspected of abusing the IR35 rules on tax and national insurance for contractors in 2012/13, compared to just 59 investigations the previous year.
The IR35 rules were introduced by HMRC to prevent contractors and freelancers from reducing their tax and national insurance contributions through the use of intermediary firms.
Bloomsbury said the steep increase in IR35 investigations could “spell trouble for some freelancers” and it claimed some “innocent freelancers are still being challenged unnecessarily”.
Martin Casmir, managing director at Bloomsbury Professional, said: “HMRC’s attitude towards IR35 hardened following a small number of high-profile tax evasion cases in 2012 involving senior executives in the public sector and the BBC.
“However, this legislation affects everyone working on a contract basis and it’s very complicated, meaning some honest freelancers are falling foul of the rules.”
Adviser view
Trystan Lewis, chartered financial planner at Chester-based Griffin Wealth Management, said: “The problem is potentially where [self-employed] people don’t seek advice from accountants upfront about how to manage their tax affairs and then things can be missed.”
