IR 35 complete failure

#1
Shock horror, this arrse and poorly thought out tax costs more to collect than it actually makes.

R35 tax is a huge failure


Tiny tax take leaves controversial system in jeopardy

By Gerry Mclaughlin • Get more from this author

Posted in Small Biz, 22nd May 2009 07:32 GMT

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Opinion Under the Freedom of Information Act, the Professional Contractors Group has been able to find out how much tax the British government has raised from IR35.

IR35 was introduced in 2000, as a means for the Government to stamp out what it considered to be "disguised employee" arrangements, which reduced tax and national insurance payment of supposed freelancers by 25 per cent. The introduction of the tax caused uproar among UK contractors, especially in the tech and engineering industries, who operated alone as one-person companies or as two-person companies in partnership with wives or husbands.

Through its FOI request, the PCG has established that the Government raised just £9.2m from IR35 in the tax years 2002/3 to 2007/8. No wonder the Government said it didn’t know how much revenue it earned from IR35 when asked in Parliament and elsewhere.

It is raising just £1.5m a year from the tax, a tiny amount in terms of the overall tax burden. The Government had expected to raise £220m a year in National Insurance contributions alone, without even taking the extra income tax into account.

The Government must have noticed the big disparity between what it expected to raise and what it is getting - a fraction of one per cent of what it anticipated from the introduction of IR35. How many contractors can be paying this tax - a couple of thousand?
.

Full story at The Register.

Great news if you're a contractor and the Tories do bin this. Bloody good PR coups for them if they do, its a no lose situation.

Edited for clarity
 

maguire

LE
Book Reviewer
#2
it's made next to no difference to me and everyone I know who works as a contractor. *shrugs*

as you say, win win for the tories.
 
#3
For those of us who finance their own training it means we could offset that against tax as we used to before, amongst other things. A good quick win for the Tories and would get thousands of contractors voting for them :D
 
#4
So for 9 years now they have been operating this. That means that they have known it was a crap idea for eight years. So for about 7 years they have been throwing away money just so as not to admit making a mistake.

FFS! I want a government that self-corects its mistakes. I have admiration for people who learn from cockups and despise people who wont but just try to hide them. That is incompetent, deceptive and wastefull.

This lot has got to go. Damned idiots.
 
#5
The thing is with Labour, they won't let the facts get in the way of pursuing their socialist utopia of wealth re-distribution. They thought they would get a bunch of free money by taxing all those overpaid contractors to the hilt - but as with most things Labour, it turned out to be bollox. :x
 
#6
I am a self employed engineer. this has hung over those who work as I do, but i am fortunate that i generally have several business on my books each year, thus negating the 'disguised employee' justification.

we need to be encouraging people to become their own business, so they can grow and replace the businesses we lose during the recession, not trying to hammer anyone who shows some independant thought.
 
P

PrinceAlbert

Guest
#7
As a contractor I have always managed to get outside of the IR35 arrangement, and any other contractor worth his salt will know how to also.

The alteration of a few choice words in a contract means you are outside of IR35, and can carry on with the company dividend route of legal tax evasion.

Companies are more than willing to change the phrases/words to get you on board.
 

maguire

LE
Book Reviewer
#8
PrinceAlbert said:
As a contractor I have always managed to get outside of the IR35 arrangement, and any other contractor worth his salt will know how to also.

The alteration of a few choice words in a contract means you are outside of IR35, and can carry on with the company dividend route of legal tax evasion.

Companies are more than willing to change the phrases/words to get you on board.
ssshhhhh!!!! :wink:
 
#9
I haven't worked in the UK since they brought it in so didn't investigate ways around it. Binning the whole thing would still be preferable I would have thought.
 
P

PrinceAlbert

Guest
#10
Ord_Sgt said:
I haven't worked in the UK since they brought it in so didn't investigate ways around it. Binning the whole thing would still be preferable I would have thought.
The only issue I have found with IR35 is when a contract has managed to approach the 2 year mark, and I have had to leave, to avoid IR35.
 
#11
PrinceAlbert said:
Ord_Sgt said:
I haven't worked in the UK since they brought it in so didn't investigate ways around it. Binning the whole thing would still be preferable I would have thought.
The only issue I have found with IR35 is when a contract has managed to approach the 2 year mark, and I have had to leave, to avoid IR35.
you don't 'need' to leave at 2 years. If the contract is worded correctly and you are running as a business you would be ok.

it is the people who get employee benefits, are paid expences as employees, and those who are explicitly contracted (rather than their company) that get cought out.
 

maguire

LE
Book Reviewer
#12
'HMRC is spending an extra £1bn in chasing up tax evasion and you can see what a paltry amount it is collecting for its trouble. All the cases being fought in the High Court and at the Special and General Commissioners over IR35 have just been a monumental waste of effort.

According to the PCG, HMRC has won just a handful of tax investigations out of thousands. Indeed, of the 1,468 IR35 investigations PCG has been involved with, HMRC proved additional tax was owed just six times.'

they're raising £1.5m a year according to the reg. so for the 1bn they're apparently spending chasing people, the return is less than 0.2%.
You would have thought with an economic genius like cyclops at the wheel they would have noticed...
 

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