IR35 Income – the 2 bn pounds a year Moneyspinner for the Government

IR35 Income - Government Moneyspinner
IR35 Income - Government Moneyspinner worth £2 billion a year

IR35 Income and the Conservatives

The Government’s IR35 income totals £2bn a year.

There was great hope that the Conservatives would abolish IR35 when they got into Government in 2010.

What they said was that they would ‘look at it‘ again.

They did and predictably they kept it.

Leaving Umbrella Companies
Leaving Umbrella Companies or staying – the choice for contractors

Swapping Umbrella Companies for Limited Companies

Perhaps the main reason stated by the review was there was a major risk that contractors would pile out of Umbrella Companies and into Limited Companies.

They did not want that!

So, why do they want as many contractors as they can in Umbrella Companies and not in Limited Companies?

See if you think this is the reason.

Umbrella Company Contractors Tax Calculation

There were figures recently that show that the tax and NI take from a Limited Company contractor is £10,000 a year less than it is for an Umbrella Company Contractors.

And do you know how many Umbrella Company contractors there now are?

Why, there‘s 200,000 of them.

Government Billions from Umbrella Company Contractors

So, what’s the Government’s IR35 income?

If you do the maths that means Umbrella Company contractors are paying in total an extra £2bn a year than if they were all in Limited Companies the way most contractor used to be.

I think I remember reading a while back that a penny rise in Income Tax would bring in £2-3bn in extra revenue.

That means that if the Government were to abolish IR35 and go back to the old ways of having all contractors in Limited Companies then they would have to raise income tax by a penny in the pound to pay for it.

Do you really think the Government is going to do this for £400 a day contractors?

umbrella companies future
The future for umbrella companies

IR35 Tax Raised Via Umbrella Companies

One has to get real.

IPSE (ex-Professional Contractors Group) is being ingenous when they say that he Government is only raising £220,000 a year from the IR35 tax or some small figure like that.

I think you have to lump another £2bn onto that.

That would be IR35 income of £2,000,220,000.

That‘s a bit different.

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