Contractor accountants could be forgiven for questioning whether it is really worth HMRC spending so much time and money pursuing IR35 cases when they discover it yielded just over £200,000 from its enquiries last year.
In the tax year ending 5th April 2011, HMRC recouped £219,180 after enquiring about the IR35 status of self-employed workers. In the previous year, the yield was even lower at £155,502, according to the Revenue’s website.
Between 6 April 2009 and 5th April 2011, 25 IR35 status enquiries were opened. In 2008/09 there were 25 and in 2007/08, 104 cases were investigated.
A spokesman for HMRC explained that IR35 stops people avoiding tax through disguised employment and it acts as a powerful deterrent. It is therefore wrong to focus solely on the cash yield when gauging the success of the legislation.
However, George Bull, the head of tax at Baker Tilly, said HMRC’s pursuit of IR35 is not bringing in revenue and they should abandon it and concentrate their efforts on other areas.
John Brazier, the managing director of the PCG, agreed saying that IR35 is completely unnecessary and piles stress on the 1.4 million genuine freelancers in the UK. The latest figures prove that the previous government introduced a worthless measure when they created IR35.
Despite the evidence showing the worthlessness of IR35, it is still in place, but a review of its administration is currently ongoing.