Recommendation 21

There is also not a complete picture of the costs of the reforms against which the benefits could be compared. HMRC has estimated the cost to hiring organisations, but its modelling is based on a theoretical minimum needed to comply, rather than an estimate of what it actually costs organisations to administer the reforms in practice. While HMRC revisited its cost estimates in light of challenge and recommendations it received from a House of Lords inquiry in 2020, its basic approach has not changed. This means it is still based on a theoretical minimum, and still only covers the private sector.46 HMRC estimated that ongoing costs for the private sector would be £8.4 million a year, and that 36 Q25; 37 Q21; HC Committee of Public Accounts, BBC and personal service companies, Ninetieth Report of Session 2017–19, HC 1522, April 2019 38 C&AG’s Report, para 3.7 39 Qq 25, 75 40 C&AG’s Report, paras 26b, 5.11 41 Q51 42 Qq 36, 37; C&AG’s Report, para 13 43 Q36 44 Q37 45 Q69; C&AGs’ Report, para 3.3 46 Qq 26, 65; C&AG’s Report, para 5.10 Lessons from implementing IR35 reforms 13 240,000 PSCs would need to have their tax status assessed.47 This means an average cost to hiring organisations—to determine the tax status and perform all other administrative activities—of £35 a year per PSC. HMRC’s research has asked surveyed public bodies what they are spending in practice, but it does not have a total estimate for the public sector to compare with its previous estimates.48