IR35's investigations and yield in first decade

by Susie Hughes at 12:35 28/10/11 (News on IR35)

The full picture of IR35's investigations and resultant tax yield is available for the first time after HM Revenue and Customs released figures showing the information from the first five years of its operation.

An earlier Freedom of Information request gave this information for IR35 investigations from 2006-2011. (See Big drop in IR35 status enquiries - Shout99, Sept 2011). Now, a second FOI request has completed the picture covering the decade since the contractors' tax law was introduced. Advertisement The results revealed that in the first six years of IR35 there were 3,886 enquiry cases and a yield of £6.7 million between April 2000 and April 2006. Comparable figures from April 2006 to April 2011 are 322 enquiry cases and a yield of £5.4 million. Although the number of investigations has fallen substantially, the tax take has remained relatively stable. It is hard to draw specific information from this, for example whether each case now produces a higher tax yield year on year, as the tax yield received from an investigation and the investigation being opened do not necessarily occur in the same year - in some cases investigations have taken more than six years. However, it is to be expected that HMRC is targeting what it perceives to be higher risk and therefore higher tax due. And the difference between the average tax take per investigation in the first half of the decade, £1,700, and in the second half, nearly £17,000, is so great that it can be assumed that HMRC is getting better at its job. Also this is not the total tax take for IR35 as there will be other income which is not accountable here. What can be ascertained is that since IR35 was introduced in 2000, there has been 4,208 enquiry cases and a resultant tax yield of £12.1 million. FOI requests HMRC's published responses to both FOI requests are below IR35 status enquiries 6 April 2000 to 5 April 2006 Request How many IR35 status enquiries has HM Revenue and Customs (HMRC) undertaken (by year, 6 April 2000 to 5 April 2006). What was the tax yield from these enquiries (by year, 6 April 2000 to 5 April 2006). Response HMRC confirms that it holds the information requested. The number of reviews opened by HMRC for the period requested where the Intermediaries legislation was identified as a risk is as follows: 6 April 2000 to 5 April 2001 is 16 6 April 2001 to 5 April 2002 is 261 6 April 2002 to 5 April 2003 is 1,016 6 April 2003 to 5 April 2004 is 1,166 6 April 2004 to 5 April 2005 is 771 6 April 2005 to 5 April 2006 is 656 The tax yield recovered in relation to these reviews cannot be indentified. 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 2000 to 5 April 2001 is nil 6 April 2001 to 5 April 2002 is nil 6 April 2002 to 5 April 2003 is £946,275 6 April 2003 to 5 April 2004 is £1,973,851 6 April 2004 to 5 April 2005 is £1,447,796 6 April 2005 to 5 April 2006 is £2,316,351 **** 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 Further information Shout99 has a section dedicated to news and information about IR35. See News on IR35. You can also subscribe to receive email alerts when new stories appear in this category. -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2011

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