Contractors question HMRC over IR35 figures

Plans on the part of the government to reform the way IR35 is applied in the public sector have been called into question by contracting bodies this week. A Public Accounts Committee have produced a report which suggests that the figures for tax compliance amongst contractors are much higher than HM Revenue and Customs had been claiming.Contractors question HMRC over IR35 figures

The report included figures sourced from a number of different government departments, which showed that as many as 90 per cent of public sector contractors are fully compliant as far as their tax affairs go.

This flies in the face of claims made around the 2016 Budget that the compliance rate was as low as 10 per cent, a figure that lead HMRC to estimate that changes to the regime could result in a £400 million windfall for the exchequer.

The figures have been repeated by representatives of both the Treasury and HMRC at a recent compliance seminar, although neither would be drawn on the source of the sums when they were asked.

The figures which the PAC have presented lend weight to the position that contractors have maintained for years, which is that non-compliance is a problem, but one that is significantly less widespread than the government would have the nation believe.

The report from the PAC includes quotes from research that was carried out by a number of government departments which was supposed to seek assurance about contractors' tax affairs. These figures show that, of 2,505 contractors who were pressed for assurances, 2,248 provided satisfactory responses, which equates to around 90 per cent.

This apparent contradiction between the figures that are being presented does suggest that there may be a dearth of evidence to support the government's position, leading some critics to suggest that there might have been something of an agenda designed to justify IR35 reforms.

The figures reported by the PAC suggest that the rationale used by the government as a justification for the IR35 reforms has no basis.

Those who are considering contracting and want an idea of how much they could be earning can use our take home pay calculator to ascertain the most efficient way to work. For those who want to know more about the relevant legislation, our guide to IR35 contains plenty of useful information and our page on contractor tax is also very informative.

For advice from an expert who will be able to ensure that you are paying the correct amount of tax, you can speak to one of our experienced accountants, so call today on 0500 152500 / 01442 275789 or email michelle.turbutt@sjdaccountancy.com.

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