Contractors will at long last learn how HMRC’s new IR35 framework, introduced in May 2012, is actually performing. This follows months of the taxman stonewalling ContractorCalculator’s repeated requests for IR35 data under the Freedom of Information Act.
HMRC has finally confirmed that it will publish the full first year IR35 review results and the amount of additional tax and National Insurance Contributions (NICs) raised since the new framework has been in place at the end of November 2013.
“Since its introduction in 2000, one of IR35’s major flaws has been the lack of certainty for taxpaying contractors over their status. This has been made worse by HMRC’s inconsistent application of the highly complex tax legislation by non-specialist inspectors,” says ContractorCalculator CEO Dave Chaplin.
“The framework introduced in May 2012 brought us the business entity tests (BETs), while four specialist HMRC teams of IR35 experts were supposed to address these issues. But how can the framework be assessed until HMRC releases performance data?”
ContractorCalculator has been requesting IR35 data since May 2013. Our aim has been to provide contractors with confirmation of the number of IR35 review letters sent during the 12 months to May 2013 and the amount of additional tax and NICs the measures have raised.
“After all,” says Chaplin, “the changes were introduced to better administer IR35 and to increase the revenue generated from contractors. How can contractors, taxpayers and even HM Treasury know how the changes are working, if HMRC won’t release the statistics?”
It was only after ContractorCalculator’s sustained correspondence with HMRC that the tax authority’s freedom of information adviser Teresa Chance confirmed to Chaplin by email that “…we intend to publish the information before the end of this month”.
The data is eagerly awaited, particularly as IR35 experts have told ContractorCalculator that the incidence of investigations of contractors in the public sector by the specialist HMRC teams has skyrocketed since the introduction of the off-payroll rules in September 2012.
“We know that many central government department clients are using the BETs inappropriately to determine the IR35 status of the contractors they have hired,” continues Chaplin.
“We also understand that the Treasury review into off-payroll workers completed in May 2012 identified thousands of contractors working in the public sector, and HMRC has put that data to good use.”
Further details of how and specifically when HMRC plans to publish its IR35 data are not yet known. As soon as the information is publicly available, ContractorCalculator will be reporting on its contents.