Assumption, not fact, is the basis of the government's IR35 response
We are disappointed but not surprised by the government’s response to the House of Lords Select Committee on Personal Service Companies, writes Andrew Chamberlain, senior public affairs manager at PCG, the trade body for contractors.
HM Revenue & Customs were asked by the committee to justify its figure of £550m as the total revenue protected by IR35.The calculation they have offered in this response is extremely crude and is based on a series of assumptions.
Based on this response it must be assumed that HMRC have no idea how much revenue is protected by IR35, which is particularly alarming given that it uses this figure as the sole justification for keeping it in place.
On the issue of costs of administrating IR35, the government again dodge the question.It claims it cannot provide a detailed figure due to the concentration of IR35 compliance work in specialist teams, and the fact that some staff from outside the teams occasionally assist them.This feels like a cop-out.Surely the government should have instructed HMRC to undertake a costing – this is what the committee called for in their report.
Elsewhere in its response, the government also dismissed the PSC Committee’s sensible public sector recommendations.
The committee made a strong, and in our view entirely sensible, recommendation that HM Treasury take a leading role in ensuring a consistent application of ‘the public sector rules’ across departments.
Unfortunately the government made no such commitment. Instead it rather tamely regurgitated a few facts and figures around the public sector assurance process .It seems that despite a clear warning from the committee, the government are oblivious to the confusion and anxiety that has been caused by departments applying the rules unevenly and without appropriate guidance.
But despite their generally disappointing response, we welcome the government’s acknowledgement of “the positive contribution to the economy of those who choose to work for themselves’ and that ‘the use of a personal service company is not indicative of tax avoidance”.