A house of lords committee published its report on personal service companies last week.  There were some interesting observations and recommendations in the report (if you like that sort of thing) including the following:

  1. Only 256 IR35 investigations were conducted in 2013/14 down from 1,000 investigations in the years 2002/04
  2. There are only an estimated 40 HMRC staff working on IR35 cases and they thought that extra resources would not be of much benefit.
  3. HMRC estimate that there are 200,000 personal service companies (seems to be a bit low to me given that there are about 2 million limited companies)
  4. HMRC asserted that £0.6 billion of tax revenue would be put at risk if IR35 was abolished but the committee noted that HMRC could not substantiate the estimate and asked HMRC to publish a detailed assessment to back up their assertion.
  5. If IR35 was to be retained, guidance on it must be improved so that taxpayers have more certainty about whether they are affected or not
  6. HMRC must be clearer on the use of questions they ask on tax returns about service companies
  7. Only 1,000 people answered the personal service company question on the self assessment tax return form in 2011/12
  8. The cost of the HMRC team enforcing IR35 compliance cost £700K pa and yet only collected £1.1 million pa.
  9. Apparently there is a huge lack of trust in HMRC’s contract review service (para 119)…..is this really a surprise?
  10. There was a worry that lower paid workers may be encouraged into a position where they give up employment rights designed to protect them
  11. It was widely acknowledged that umbrella companies are abusing the dispensations on expenses that HMRC give them
  12. A review found that 2,400 public sector staff earning £58,200 pa or more were engaged by personal service companies
  13. The media gross earnings in the UK are currently around £27,000 pa

 

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