Revenue is preparing a crackdown on thousands of engineers and IT professionals after uncovering “deliberate understatement” of tax by those who have set up companies to trade as independent contractors but work for a single client.
The planned swoop, notified by revenue to tax advisers last week will concentrate initially on Cork, Limerick, Kerry and Clare, although a nationwide investigation is expected to follow.
The current move represents the first attempt to extend the PAYE net to a growing army of IT professionals who prefer the flexibility of working as independent contractors.
Revenue is offering reduced penalties to encourage voluntary disclosure of underpaid tax. Those who come clean are also being promised immunity from public naming and shaming as tax defaulters. If revenue suspects their disclosures are incomplete however, it will audit their companies’ accounts for at least the previous four years.
Revenue is concerned that contractors are reducing their tax bills by charging expenses such as travel and subsistence costs to their companies – deductions that could not be claimed if they were taxed as employees by the business for which they work.
Employees are not allowed claim tax deductions for the cost of travelling to their normal place of work, whereas contractors are claiming these reductions even when they spend most of their time working on-site at a client’s premises.
