UK TREASURY UNDER FIRE OVER £740M LOSS CLAIM

The UK Treasury says delaying IR35 reforms meant it forfeited £740 million. However, this claim has been questioned by experts, according to a report by Contractor UK.

The changes were due to come into force in April, but were delayed due to the COVID-19 pandemic. Chancellor Rishi Sunak, in his recent Spending Review, said that delay had meant Treasury has forfeited £740 million in income.

No delay

The reported cost of the delay is being seen by some as further evidence there will be no further hold up in introducing the reforms, due on April 6th.

The changes are likely to lead to many contractor positions being lost, and given the current economic situation, caused in main by coronavirus, it was hoped the introduction would be postponed again.

However, the UK Government is expected to press ahead as scheduled.

Criticism

Contractor UK quotes experts who have called the Treasury forfeit figure into question.

It quotes Qdos boss Sen Maley, who contends the Treasury figure is an ‘estimation’.

“As we all know, the government believes that IR35 non-compliance is widespread,” the website quotes Mr Maley saying.

“[It reckons] as many as nine in 10 contractors who ought to be working inside IR35 are currently operating outside the scope of the legislation.

“But in our experience, most contractors carry out their due diligence and ensure they are working compliantly with regards to IR35.”

Foundation

Contractor UK goes on to quote Kate Cottrell, co-founder of Bauer & Cottrell, who says the forecast is not “based on anything concrete”. 

“Not least because HMRC have claimed for many years that they did not actually know the size of the IR35-affected population,” the website quotes her saying.

“And I recall that HMRC had a very embarrassing time at the House of Lords, when they tried to defend their figures the last time.”

PSCs

However, Contractor UK goes on to quote ReLegal Consulting owner Rebecca Seeley Harris, who says the £740 million figure may be in “anticipation of a reduced number of PSCs.”

She tells the website that while limited company workers changing structure ahead of the rules may inform the predicted revenue dip, little else probably does.

“When I was at the Office of Tax Simplification, we used to get our details from HMRC’s Knowledge, Analysis and Intelligence directorate,” Contractor UK quotes her as saying.

“But KAI uses some very dubious proxies to make these assumptions. Sometimes they might as well just stick their finger in the air.”

Read on

Read the full article on Contractor UK.

If you are still struggling to understand IR35 reform, visit the ContractingWorks Resource Hub.

If you are looking for a new contract engagement, visit our Job Board to search more than 10,000 vacancies, updated daily.