IR35: Is HMRC applying penalty to the whole amount rather than tax owned?

Hello, I'm a solicitor specialising in employment rights. I just found out that in case of non-compliance where HMRC disagrees with a contractor or agency, the penalty is calculated on the full PAYE amount. That comes from the new consultation on set off. Example: Inside IR35 PAYE due: £200k Outside IR35: £180k already paid in corporation tax and dividends. Tax owed: £20k Penalty: 50% Tax due: £20k + 50%*£200k =£120k. Thus a real penalty of £100k ( 500% ) on a £20k tax. I don't think that follows the law and fairness. Can you comment on that please?

Hi,

Please contact the IR35 status line for advice or, alternatively, write to:             

HM Revenue and Customs
IR35 Customer Service Unit S0733
Newcastle Upon Tyne
NE98 1ZZ

Employment status

Thank you.