Contractors who have been longing to see the back of IR35 might be interested to learn that HMRC’s average yield per case has leapt by 100%.
Until 2006, the average IR35 case netted the Revenue £1,700, however in the following five years, the haul jumped to £17,000 per case. This improved yield has been put down to better targeting. Between 2000, when IR35 first came into being, until April 2006, there were a total of 3,886 cases netting HMRC a total of £6.7 million. From2006 -11, 332 cases netted £5.4 million.
Earlier this year, the PCG pointed out IR35 only yielded £220,000 in the tax year 2010-11 and that the rule was worthless. Paul Spindler, a chartered accountant from Kingston Smith, agreed with that sentiment saying that IR35 had only recovered £13 million in ten years.
He went on to say that we only have a snippet of the full picture as we have no idea how many umbrella company contractors are under PAYE simply because of IR35 legislation. Spindler now believes it’s time for HMRC to seriously think about alternatives to IR35.
Kate Cottrell, an IR35 expert who has been seconded to the OTS’ review of IR35, said the figures show that HMRC has improved its administration of IR35, but pointed out that the deterrent was what yielded most for the Treasury.
However, as Seb Malley from Qdos explained, a lot of people are still abusing the system by claiming to work through a limited company when it is blindingly obvious that they are working like an employee.
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