IR35 only collects £220000 in tax

The Professional Contractors Group (PCG) has called on the government to explain why IR35 was retained after it yielded just £220,000 in the last tax year.
HMRC admitted, in response to a freedom of information request, that IR35 status enquiries fell from 158 in 2006/2007 to 23 in 2010/2011. The tax yield also highlights a dramatic reduction from more than £1.9m five years ago to £219,180 this year.
John Brazier, managing director of PCG, referred to IR35 as an unwarranted measure introduced by the previous government. He said: “These figures confirm what PCG has always said, that the tax yield from IR35 is minimal and that the stress and damage done to the UK’s 1.4m genuine freelance businesses is completely unnecessary.
“It is now time for the decision makers to explain more clearly to freelancers and the public why the risk to the exchequer would be simply too great if IR35 was abolished or suspended," Brazier added.
As directed in the Budget this year, the administration of IR35 is being reviewed and it is hoped that the government will address the issue later in the year.
Chris Bryce, PCG chairman and IR35 Forum member, added: “He [the Chancellor] has a great opportunity in the November statement to release businesses from this ridiculous burden and free up HMRC resource to work on better things."
IR35 status enquiries: 6 April 2006 to 5 April 2011
HMRC confirmed that the number of reviews opened in the last five years, where the Intermediaries Legislation (IR35) was identified as a risk, was:
  • 6 April 2006 to 5 April 2007: 158
  • 6 April 2007 to 5 April 2008: 104
  • 6 April 2008 to 5 April 2009:   25
  • 6 April 2009 to 5 April 2010:   12
  • 6 April 2010 to 5 April 2011:   23
The Revenue also provided the tax yield received for the requested years:
  • 6 April 2006 to 5 April 2007 = £1,906,619
  • 6 April 2007 to 5 April 2008 = £1,730,640
  • 6 April 2008 to 5 April 2009 = £1,430,358
  • 6 April 2009 to 5 April 2010 =    £155,502
  • 6 April 2010 to 5 April 2011 =    £219,180
HMRC is expected to continue investigations but possibly taking a more targeted approach, focusing on 'high risk' areas.

Full article at: