Big drop in IR35 status enquiries
HM Revenue and Customs has revealed a substantial drop in IR35 enquiries in the past five years.
In response to a Freedom of Information request, HMRC admitted that the number of IR35 status enquiries fell from 158 in 2006/2007 to 23 in 2010/2011 - though this most recent figure is twice as many as in the previous year. The tax take also fell from nearly £2 million five years ago to almost £220,000 this year - although again the figures show that this has risen on the previous year. These figures do not necessarily represent the total IR35 tax take.
The tax enquiries dwindled to a mere dozen in 2009/2010 - possibly as a result of speculation that IR35 was to be removed. However a report into the options for IR35 by the Office of Tax Simplification resulted in a decision by the Government to retain the tax but improve its administration, which could result in renewed activity in the area.
Reports from HMRC to the IR35 Forum show that they will be continuing investigations but possibly taking a more targeted approach and focusing on 'high risk' areas - although it is not yet known what they will consider high risk.
Details
The FOI request, published on HMRC's website, shows:
Request
How many IR35 status enquiries has HM Revenue and Customs (HMRC) undertaken (by year, over the last five years).
What was the tax yield from these enquiries (by year, over the last five years).
Response
HMRC confirms that it holds the information requested.
The number of reviews opened by HMRC for the last five years, where the intermediaries legislation (more commonly referred to as IR35) was identified as a risk, is as follows:
- 6 April 2006 to 5 April 2007 is 158
- 6 April 2007 to 5 April 2008 is 104
- 6 April 2008 to 5 April 2009 is 25
- 6 April 2009 to 5 April 2010 is 12
- 6 April 2010 to 5 April 2011 is 23
The tax yield recovered in relation to these reviews cannot be identified. This is because a review is not always concluded in the same year that it was opened. However, HMRC can provide the tax yield received for the requested years, which is:
- 6 April 2006 to 5 April 2007 = £1,906,619
- 6 April 2007 to 5 April 2008 = £1,730,640
- 6 April 2008 to 5 April 2009 = £1,430,358
- 6 April 2009 to 5 April 2010 = £155,502
- 6 April 2010 to 5 April 2011 = £219,180