Umbrella company contractors may be interested to learn that HMRC only yielded slightly over £200,000 last year from their enquiries into the IR35 status of self-employed workers.
Between April 6th 2010 and April 5th 2011, the Revenue recouped £219,180 and in the previous year the take was even lower at £155,502. Only 25 cases were opened during the two year period, the same amount as in 2008-09. The number of new enquiries does seem to be dropping off dramatically when you consider that 104 enquiries were opened in 2007-08.
A spokesman for the Revenue explained that IR35 was a major deterrent and it would be wrong to judge its success simply by the amount of money it yields.
However, George Bull, the head of tax at Baker Tilly, said that HMRC’s pursuit is not paying dividends and it should leave IR35 alone and concentrate on more pressing areas of tax evasion.
John Brazier, the MD of the PCG, said that the latest yield figures confirm what his organisation has always said. IR35 brings in minimal tax and it is a completely unnecessary piece of legislation that causes stress to the 1.4 million genuine freelancers in the UK.
The Treasury is keen to stamp out all forms of tax evasion and avoidance and recently introduced new legislation to close down a scheme that involves manufactured overseas dividends. The scheme enabled companies to offset income tax even if there had been none paid.
David Gauke, the exchequer secretary to the Treasury, said everybody must pay the correct tax at the correct time and the government is determined to make sure they do.
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