TaxPersonal TaxOpinion: IR35 yield improvement a baby step

Opinion: IR35 yield improvement a baby step

Progress on IR35 is little more than a baby step in the right direction, says Calum Fuller

IR35 has not been the taxman’s favourite subject in recent times.

It has been the source of various controversies, not least the 2,000 senior public office holders engaged off-payroll, potentially affording them lower tax bills.

The IR35 legislation is designed to ensure tax and national insurance are not avoided by would-be employees working as freelancers.

Then came the news that 148 of the BBC’s presenters could have been working long-term for the broadcaster in the same way, before HM Revenue & Customs chief executive Lin Homer admitted that just 23 IR35 investigations had been carried out last year.

Today, the Public Accounts Committee expressed “shock” that the BBC employs 25,000 people off-payroll, with 3,000 of those engaged through private companies.

So the reports this week from Bloomsbury Professional that the taxman had markedly increased its IR35 yield approximately fivefold is ostensibly a big step.

Ostensibly.

We are, of course, starting from a very low base, but the rise from £219,180 derived from investigations in 2010/11 to more than £1m last year is a significant jump. It is still, though, a very modest haul.

But HMRC was keen to point out that we “ain’t seen nothing yet”, and it’s right. We haven’t.

The introduction in April this year of three teams based in Croydon, Manchester and Edinburgh devoted to the application of the legislation should help.

Those teams, though, had no part in bringing in the additional £800,000 we’ve seen, so we’re still to see how effective they are.

However, the taxman fully expects them to exceed the tenfold increase target Lin Homer set at the Public Accounts Committee in July.

That’s a big promise given the litany of problems IR35 has encountered, but the introduction of these teams is an attempt to turn the corner.

More resources should mean greater tax yields – perhasp even to the point that it becomes a deterrent.

But addressing the issue may take more than dedicated teams. It will need to be accompanied by evidence of success against a backdrop of previous failure.

Maybe the public sector IR35 issues could actually prove a boon in bringing the issue out into the open.

If it is not, then progress is unlikely to be made.

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