Recommendation 22

HMRC does not have estimates for the costs incurred by organisations other than hiring bodies. The government introduced the reforms because it considered it too costly for HMRC to oversee an effective compliance regime with each individual PSC.49 It is not clear what HMRC’s own costs are for its compliance work before and after the reforms.50 In estimating the administrative burdens of the reforms to the private sector, HMRC also assumed that hiring organisations can administer the rules for less cost than PSCs doing it themselves.51 However, HMRC acknowledges that this assumption was based on PSCs applying the rules correctly under the previous regime, which is not what was happening in the real world—indeed, in 2016, HMRC estimated that only 10% of PSCs were compliant.52 It is also not evident that PSCs will no longer incur any administrative costs, particularly where only part of their business is determined as within the IR35 rules, which creates additional complexity and therefore cost.53 47 Q 39; Written evidence submitted by HMRC dated 10 March 2022 48 Q60 49 Q70; C&AG’s Report, para 1.11 50 Qq 59–61 51 Qq 59, 65; C&AG’s Report, para 5.10 52 Q65 53 Qq 81–82 14 Lessons from implementing IR35 reforms