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HMRC figures on IR35 completely inaccurate, says self-employment body

In response to criticism by the House of Lords Select Committee on & lsquo;Personal Service Companies’, HMRC has attempted to justify the apparent &pound550 million cost of abolishing IR35, setting out in a new report how this figure was arrived at. IPSE continues to argue that this figure is inaccurate and based on huge assumptions. IPSE also believes the alleged &pound15.9m administrative burden on the UK’s smallest businesses of complying with IR35 is underestimated.

Simon McVicker, Director of Policy and External Affairs at IPSE, said, “We have always maintained that HMRC’s claimed cost to abolish IR35 is completely inaccurate and the calculations presented in HMRC's report do nothing to change our view. They appear to be based on huge assumptions about individual behaviour and thus we believe this figure is difficult to rely on with any confidence.

“HMRC also claim the annual administrative burden on businesses is &pound15.9m but this is a wild underestimation. In 2009, Oxford Economics said the average cost of IR35 admin for a business was &pound853. If you apply this to HMRC’s own estimation that it affects 200,000 limited company contractors, this would put the figure at a whopping &pound170m.

“In any case, IR35 is a nightmare administrative burden for freelancers up and down the country. It’s deeply unfair, overly complex and small business owners continue to be unsure of what their IR35 status is. In our recent manifesto, we call for a freelancer limited company structure within the tax system. This structure would be fair, transparent and for those who decide to opt into it, would make IR35 redundant. Instead of attempting to justify a flawed policy, we hope HMRC will instead give serious consideration to our sensible proposal for a freelancer limited company.”


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