 |
|
| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
|
 |
The Government is under pressure to answer serious questions about enforcement of controversial tax rule IR35 in light of new data showing HMRC investigations have a ‘success’ rate of less than one per cent. The figures, which stem from IR35 investigations handled by the Professional Contractors Group (PCG), have revived debate over whether Government is spending taxpayers’ cash constructively, in what the Group condemned as, “the dogged pursuit of freelance contractors.” Simon Juden, PCG chairman, has written to Dawn Primarolo, the Paymaster General, to ask about the efficiency and cost of IR35 investigations, enquiring also whether the Government plans to review the criteria for launching IR35 probes. Ms Primarolo, the minister overseeing HM Revenue & Customs (HMRC), will receive the PCG demands before the publication of Gordon Brown’s Pre-Budget Report, but the Group conceded they have no “specific expectations” by December 5. “We know that out of more than one thousand cases investigated, just three were found to be in breach of IR35 rules. This clearly raises several questions about the efficacy and cost to the taxpayer of such investigations,” Dr Juden said in a statement. Over 500 of the trade body’s members have been subject to an IR35 investigation, which can cause extreme stress, be time-consuming, costly and damaging to client-contractor relations, Dr Juden explained. He added only three individuals were found to be caught by IR35, prompting the inevitable question to the Government, ‘How much is each investigation costing the taxpayer and how much extra tax does it yield?’ The ‘success’ rate of IR35 investigations gives further cause to question whether such a “dogged pursuit of freelance contractors and small business owners is justified” - when so many are failing outright. Beyond the powers of the PCG, its political researcher John Kell, believes the “bulk of cases where the contractor has stood their ground and been properly represented have turned out [to be] not entirely to HMRC’s advantage.” Speaking to Contractor UK, Mr Kell warned one of the three defeats for contractors illustrated a new and challenging dimension of the ambiguous tax rule. “It must be remembered…that the Usetech case, in which the courts decided that IR35 status can be decided by the upper contract, between agency and end-user, which the contractor never sees and to which they are never party…adds another dimension to the fundamental unfairness of IR35.” Contractor specialists at SJD Accountancy agreed yesterday that the ratio of successful-to-unsuccessful IR35 probes is cause for taxpayers’ concern. “On the face it HM Revenue and Customs appear to be wasting money on IR35 investigations,” said David Wilsdon, director at the firm. “The income generated from a handful of successes will be far less than the cost of 500 investigations.” He added thousands of freelance contractors are currently spending “many millions of pounds in extra tax” simply to distance themselves from the prospect of an IR35 investigation. “The hidden benefits to the Treasury of IR35 investigations are significant. Many thousands of contractors are treating themselves as inside IR35 simply through fear of the investigations. “These contractors are paying many millions of [pounds in] extra tax because of IR35. Without the combination of IR35 regulations and investigations, these contractors could well be paying business tax rather then equivalent to employment tax,” SJD said in a statement. It added those contractors who are treating themselves as inside IR35 should consider obtaining a review of their contract from an organisation such as SJD Accountancy. Mr Wilsdon explained: ”This could highlight that contractors are - or could be - outside of IR35 and that they are paying too much tax simply due to the fear of investigation.” Meanwhile, the PCG reflected on the extremely low rate of successful IR35 investigations, commenting to CUK: [We have] always campaigned for clarity, consistency and common sense in taxation - these figures suggest none of those. “We hope that the Paymaster General will give us an indication of how much these failed investigations are costing the taxpayer.” Nov 16, 2005 Email this article Printer friendly page Previous Page
|
|
  |
||||||||||||||||||||||||
| All content © Contractor UK Limited | [Register for News Letter] | [Privacy Statement] | [Terms of Use] | [Top of Page] |