Lobby group slams IR35 investigations

The Professional Contractors Group is asking for details of the cost and efficiency of IR35 investigations

Whitehall has come under fire for over-zealous investigations of IT contractors who it suspects of dodging the controversial IR35 rule.

IR35 was designed to clamp down on freelancers who minimise income tax liability by paying themselves with company dividends rather than wages.

The Professional Contractors Group (PCG) is pressing the government for details of the cost and efficiency of IR35 investigations carried out by HM Revenue & Customs after figures revealed a 'success' rate of less than one per cent.

PCG chairman Simon Juden has written to Dawn Primarolo, Paymaster General to the Treasury, asking whether the government is planning to review the criteria for launching IR35 investigations.

"We know that out of more than 1,000 cases investigated, just three were found to be in breach of IR35 rules. This clearly raises several questions about the efficacy and cost to the taxpayer of such investigations," said Juden.

"More than 500 PCG members have been put through these investigations, which can be extremely stressful, time-consuming and costly, not to mention damaging to client/contractor relationships.

"All but three of them were found to be outside the IR35 rules. We have to ask whether this dogged pursuit of freelance contractors and small business owners is justified. How much is each investigation costing the taxpayer and how much extra tax does it yield?

"The PCG has always campaigned for clarity, consistency and common sense in taxation. These figures suggest none of those."