A contractors' group has called for the controversial IR35 tax regulation to be scrapped, after suggesting the rule could cost more to run than it makes.
The IR35 tax rule potentially costs more in regulation than it brings into the government's coffers, according to figures obtained via a Freedom of Information Act.
According to the Professional Contractors Group (PCG), which made the request, between the financial years of 2002/03 and 2007/08 the tax raised £9.2 million, an average of roughly £1.5 million a year. The government had predicted that the tax would raise £220 million annually through National Insurance contributions alone.
IR35 was brought in by the government to tackle false self-employment claims by requiring contractors to prove their employment status. However, PCG claimed that HM Revenue & Customs investigations into alleged breaches were "distressing" for legitimate freelancers.
Of the 1,468 investigations which PCG has been involved with, just six were found to require extra tax payments.
"IR35 makes very little money for the government and given the cost of enforcing it, and the number of failed investigations for HMRC, it may even cost more to implement than it actually brings in," said John Brazier, PCG managing director.
"This is a ludicrous state of affairs. IR35 restricts the flexibility of the labour market and is difficult to enforce. It should be abolished at the earliest opportunity."
