Is this the end of the road for IR35 rules?

In 2006-07, the Revenue conducted 158 IR35 status enquiries, but last year only 23 such investigations were undertaken. Five years ago, HMRC took in almost £2 million from its IR35 enquiries - this year that take is down to just under £220,000.

This latest set of figures will surely undermine any justification for the retention of IR35. John Brazier, the Managing Director of the PCG, said the data confirms what the Group has always said - IR35 yields minimal tax and does unnecessary damage to 1.4 million freelance businesses in the UK.

He went on to say that it is becoming ever more difficult for the government to justify continuing this unwarranted regulation.

HMRC has been quick to remind us that IR35 acts as a deterrent and the figures do not necessarily represent the total amount of revenue brought in by IR35. After the Office of Tax Simplification looked into the viability of IR35, the government decided to retain it and improve the way it is administered.

The Revenue has been contributing to the IR35 Forum and confirmed that it will continue its investigations but it may take a more targeted approach and focus more on high risk areas. However, HMRC has not yet revealed what areas it considers as high risk.

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