LONDON: HMRC has finally published its updated assessment of the risk to the Exchequer if IR35 were to be abolished, alongside its assessment of the compliance costs of IR35.
According to ContractorCalculator CEO Dave Chaplin, Estimating the Administrative Burden of IR35 and the cost of abolishing it, promised to the House of Lords Select Committee on Personal Service Companies in July 2015, is based on deeply flawed assumptions.
HMRC is in massive denial about IR35 and its effectiveness,” warns Chaplin. “The taxman has a piece of legislation that seasoned contractors pay lip service to and that HMRC acknowledges is unenforceable.”
“HMRC then produces highly questionable figures about IR35’s so called deterrent effect, with underlying assumptions that have been shown to be flawed. There is only one reason IR35 stays, and it’s political. In the wake of the anti-tax-avoidance rhetoric, the government, Treasury and HMRC simply cannot afford the political fallout that will arise if IR35 is abolished.
Chaplin points to a survey completed by ContractorCalculator last year that proved the major barrier to highly paid employees incorporating is not IR35, about which many have simply no knowledge.
Our data shows that it is employers who prevent their employees from incorporating, so the £405m of income tax and National Insurance Contributions (NICs) HMRC estimates are generated by the deterrent effect of IR35 is simply a fantasy.”
