Only 3 in 1000 IR35 investigations find breach of rules

The Professional Contractors Group (PCG) is pressing the Government for details of the cost and efficiency of IR35 investigations carried out by HM Revenue & Customs after figures revealed a "success" rate of less than 1% for HMRC.

PCG chairman Simon Juden has written to Paymaster General Dawn Primarolo, asking whether the Government is planning to review the criteria for launching IR35 investigations.

"We know that out of more than one thousand cases investigated, just three were found to be in breach of IR35 rules.

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Comments

Here's what IR35 has achieved .....

AnonymousUser | | Permalink

The Finance Act 2000 and its clause IR35 have saved a lot of people, a lot of tax, and will continue to do so. It has made a very large proportion of previously tax neutral individuals and companies sensitive to how they pay taxes. It has replaced what was once a quiet acceptance of tax into an avoidance industry in its own right.

..... and for my part at least, it has turned someone who previously had little interest in tax and who’s approach was simply to write a cheque out whenever my accountant told me I owed IR/HMRC money into someone who watches them like a hawk and now complains at EVERY opportunity.

This after a 3 year IR35 review that produced no additional liabilities and that a). could have been completed in less that 6 months had it not been for the ignorance and arrogance of the idiot compliance officer, b). cost me close to £5k in accountancy fees, specialist advisor fees and lost unbillable time (all totally unnecessary) and c). caused untold stress hassle and aggravation. And what did HMRC get out of it? Absolutely nothing, which is exactly what I told them would be the result in the first 3 months of the review.

What REALLY p****d me off most was the totally unprofessional approach and total arrogance of these people. Maybe I was naive but I have to say that I was shocked beyond belief at the way HMRC conducted the whole affair.

So to reflect on your point what has IR35 achieved from me? Well I have now reduced my salary from what was a reasonable level to £1 over the NI limit and their take has reduced accordingly. I pay everything else through dividends, I push as much through my company and write it off as I’m able to do, I delay payments and generally make HMRC’s life as difficult as I possible can and will continue to do so for as long as I can. That’s what IR35 has achieved.

Creditability

Anonymous | | Permalink

Is this what we call penny wise pound foolish and no wonder there is such a big hole in UK plc with incoherent policies of this parliament. Had these people been running their own business, they would have been bankrupt many times over by now. It is a good job these people are not in business and it is no wonder this parliament has never been in business

Labour Blessings

baseline | | Permalink

If one takes a statistical view of successful actions brought by HMRC it would be clear that the problem never existed to any large extent in the first place.

What has happened since IR35 came on the scene is that the problem, if there ever was one, is no longer associated with lone individuals but is now disguised by large Umbrella companies, so statistically the sample has fallen hugely in volume.

The Revenue for sure take the view that these companies comply with what is required and one might argue that this has forced compliance on a large sector of the labour market. These companies have been a blessing to disguised employees simply because they have not been forced into the hassle of incorporation.

Some of these companies even provide dividend payment as part of the package. So much so, that traditional self-employed trades people, denied employment under the Employment Agencies Acts have flocked to these companies in droves. The interface with employment has never been easier for native or foreign labour legal or otherwise.

Given the alternatives now available, its more likely that incorporation reflects true self-employment rather than the contrary. This is probably why the HMRC hit rate is proving so low.

The Finance Act 2000 and its clause IR35 have saved a lot of people, a lot of tax, and will continue to do so. It has made a very large proportion of previously tax neutral individuals and companies sensitive to how they pay taxes. It has replaced what was once a quiet acceptance of tax into an avoidance industry in its own right.

The more complex the tax system the more leakage ensues because of the confusion. The cost of IR35 compliance is not one New Labour will reveal simply because of its failure.