The Professional Contractors Group (PCG) recently claimed on its own website that HMRC had initiated 2,000 new IR35 enquiries since May of this year when the improved IR35 administration was born. It was also claimed that “most commentators” believed the statistic to be correct too.
HMRC's response to the claim was that the PCG had been “misinformed” and the figures were incorrect. Since then the trade association has removed the erroneous revelation from its website and furthermore has distanced itself from the claim preferring to point the finger of blame at Abbey Tax. The PCG has now taken a polarized stance by stating that it “does not believe 2,000 IR35 enquiries have been started since May 2012.”
PCG members, which number 20,000, were sent a newsletter in which they were warned by Abbey Tax, the PCG's affiliate and through whom IR35 insurance is purchased, of a “hundred-fold increase” in IR35 enquiries in only 6 months! Given that HMRC had only recently promised the Public Accounts Committee to increase its IR35 enquiry activity by ten-fold in comparison to the year ended 5th April 2011 (23 enquiries) this was a quite extraordinary statement to have made.
Although three new specialist IR35 teams were created in May 2012, these are relatively small and to expect them to have opened 2,000 enquiries is implausible.
The Revenue's IR35 resources will already be stretched in reviewing the 2,400 public sector cases plus the 25,000 BBC contracts, so whilst Abbey Tax's claim may be incredulous they may have inadvertently predicted the future if less than 10% of those HMRC's reviews are converted into enquiries.