Lords PSC Select Committee – IR35 worth £550m a year

Following on from HMRC’s disclosure, last year, that it had increased receipts from IR35 investigations to £1.1m in 2012/13, evidence by Rowena Fletcher, an official responsible for Employment Status at the Revenue gave evidence to the committee that this was dwarfed by an estimated £550m in tax revenues received each year as a result of IR35 being in place. This includes the amount of tax that would be lost if IR35 did not prevent many workers from using a PSC.
However, the Professional Contractors Group told the committee that scrapping IR35 would save contractors £843 per year, on average, the amount they pay each year to protect themselves against the legislation.
The group also stated that abolishing IR35 would remove uncertainty and provide a benefit to the UK economy, evidenced by the fact that more than a fifth of SMEs are put off from hiring contractors by the complexities and perceived risks in the legislation, effectively a barrier to productivity and work.
The PCG said that, if it was not abolished, then IR35 should at least be suspended, citing the fact that 84% of contractors claim that saving tax and NI is not the main reason they use a PSC.
The committee is due to report its recommendations in March.

Posted by John Hoskin