.png)
.png)
Employment experts have accused HMRC of misleading businesses about the operating cost of IR35.
Statistics released by the department yesterday suggest UK firms spend an annual total of £16m on administrating the controversial anti-avoidance measure, which is aimed at ensuring freelancers working through their own limited companies pay income tax and National Insurance at a levels similar to those of regular employees.
Employment experts have accused HMRC of misleading businesses about the operating cost of IR35.
Statistics released by the department yesterday suggest UK firms spend an annual total of £16m on administrating the controversial anti-avoidance measure, which is aimed at ensuring freelancers working through their own limited companies pay income tax and National Insurance at a levels similar to those of regular employees.
But the Association of Chartered Certified Accountants (ACCA) believes the taxman’s numbers do not tell the full story, because they fail to address the wider costs to other businesses in the chain of the compliance process.
“Agencies and end-users will often face an administrative burden of replying to a contractor’s requests, while the contractors themselves will often be in limbo until the information is forthcoming,” said the ACCA’s tax technical manager, Jason Piper.
“The wider costs of IR35 are beyond what HMRC has the remit or resources to reasonably investigate, but it’s clear the policy-making process needs to address that wider drag on the economy.
Piper, who sits on the tax department’s IR35 forum, added, “The government has clearly identified a risk that it wants to address, but it’s important to make sure the mechanisms are the best [possible]. That may mean devoting more time and resource to the underlying design, but that initial spend will be more than repaid in efficiencies further down the line.”
The Revenue’s new figures suggest the axing of IR35 – imposed in 1999 – would come at a £550m cost to the Exchequer, but the amount is not the true explanation for the legislation’s continuing existence, according to Dave Chaplin, CEO of ContractorCalculator, a leading online resource for freelancers.
“There is only one reason IR35 stays – and it’s political. In the wake of [recent] anti-avoidance rhetoric, the government, the Treasury and HMRC simply cannot afford the political fallout that will arise if IR35 is abolished,” Chaplin told his website.
