IR35 - Revenue Raised

Revenue Raised

The initial regulatory impact assessment for IR35 in 1999 stated that HMRC expected the measure to generate £220 million per year in National Insurance contributions, and a further £80 million in income tax.

On 6 Jan 2004 Dawn Primarolo was asked by the Shadow Paymaster General Mark Prisk MP about additional revenue secured from investigations under IR35. She replied that "Establishing whether or not the intermediaries legislation applies is undertaken as part of the Inland Revenue's Employer Compliance Review programme. As such it is not possible with any accuracy to isolate data relating solely to this legislation." She gave a similar answer when asked about administration and employment costs.

In May 2009 the Professional Contractors Group received a reply to a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 had in fact raised for the exchequer. The FOI reply revealed that in the tax years 2002/03 to 2007/08, IR35 directly raised just £9.2 million. This equates to an average of around only £1.5 million per tax year, less than 1% of the expected amount. It is not clear whether this includes the NI contribution, or is just income tax.

In September 2011 a Freedom of Information Request revealed that the number of cases reviewed had fallen from 158 (year ending April 2007) to 12 in year ending April 2010 and 23 in year ending April 2011. The same document also gives the "tax yield received for the requested years" as having fallen from £1,906,619 to £219,180. No details are given for the costs of the investigations or the costs of collecting the tax. It is not clear whether this figure relates to the revenue raised from investigations, or the total revenue from IR35. No figues were given for the cost of administrating the tax, or the cost of the investigations.