HMRC Cost of Administering IR35

HMRC Publish the Cost of Administering IR35

16 March 2015

HMRC has published the cost of administering IR35 and an estimate of the tax they think they’d lose if it was abolished. This, despite the cost of administering IR35, greatly outweighing the cash collected from IR35 investigations.

The report estimates the cost of administering IR35 to be £16m and the tax that would be lost if it was abolished to be £550m.

This loss is estimated based on the number of people who HMRC believe would then register limited companies as a way of disguising employment income. Operating through a limited company has favourable tax treatment when compared to being paid through Pay as you Earn (PAYE). Clearly this estimate is based on a number of assumptions that could be wrong. The actual impact cannot be known with any degree of certainty.

In Treasury Questions in January 2015, David Gauke, the Financial Secretary to the Treasury, disclosed the following amounts had been collected from IR35 investigations.

  • 2009/10 – £155,000
  • 2010/11 – £219,000
  • 2011/12 – £1.2m
  • 2012/13 – £1.1m
  • 2013/14 – £430,000

The Full HMRC Report is available at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/411583/Estimating_the_administrative_burden_of_IR35_and_the_cost_of_abolishing_it.pdf

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