The £61M IR35 Blunder: How Poorly Drafted Legislation is Crippling ITV and the Creative Sector

In a week where ITV announced 200 redundancies in its Daytime division to cut costs, a far larger financial threat looms over the broadcaster. According to ITV’s 2024 annual report, a potential £61 million tax bill from HMRC, linked to the controversial IR35 and off-payroll working rules, dwarfs the savings sought through layoffs. This liability, twice the amount ITV aims to save through redundancies and equivalent to wiping out its 11% year-on-year profit (EBITA) increase, underscores the catastrophic consequences of poorly drafted tax legislation on Britain’s creative industries.

The IR35 Debacle: A Legislative Misstep

Introduced in 2000 and significantly reformed in 2017 and 2021, IR35 was designed to ensure that self-employed workers or those operating through intermediaries, like personal service companies (PSCs), pay taxes comparable to employees when their working arrangements resemble employment. The intent was to tackle tax avoidance, but the execution has been a masterclass in bureaucratic overreach and ambiguity.

 

The ITV case highlights the legislation’s flaws. The £61 million liability, dating back to 2016, likely stems from HMRC’s retrospective assessments of freelancers and contractors hired by ITV, many of whom are sole traders or work through intermediaries. The creative sector, reliant on flexible, project-based talent, has been hit hardest by IR35’s vague definitions and inconsistent enforcement. ITV’s predicament is not unique but emblematic of a broader issue: IR35’s poorly crafted rules have created a minefield for businesses and freelancers alike.

A Vague and Punitive Framework

At the heart of IR35’s failure is its lack of clarity. Determining whether a worker falls “inside” or “outside” IR35 hinges on complex criteria like control, mutuality of obligation, and substitution rights. These terms are subjective and open to interpretation, leaving companies like ITV vulnerable to HMRC’s retrospective challenges. The 2021 reforms shifted the responsibility for determining IR35 status from freelancers to hiring organisations in the private sector, placing an immense compliance burden on businesses. For ITV, this has translated into a £61 million sword of Damocles, threatening financial stability.

 

The legislation’s retrospective nature is particularly egregious. HMRC’s ability to pursue tax liabilities back to 2016 punishes companies for decisions made in good faith under unclear guidelines. ITV, like many in the media industry, relies on a flexible workforce of presenters, producers, and technical staff. These workers often operate as freelancers to meet the industry’s project-based demands. Yet, IR35’s blunt approach fails to account for the nuances of creative work, where short-term, specialised engagements are the norm, not the exception.

The Creative Industry’s Collateral Damage

ITV’s £61 million liability is a stark reminder of IR35’s chilling effect on the creative sector. Freelancers, fearing misclassification, face reduced opportunities as companies scale back hiring to avoid tax risks. The redundancies at ITV’s Daytime division, while framed as cost-cutting, reflect a broader trend of risk-averse restructuring. The creative industries, a cornerstone of the UK economy, thrive on agility and innovation—qualities stifled by IR35’s rigid framework.

 

The financial impact is staggering. ITV’s potential tax bill exceeds its cost-saving measures and wipes out its profit growth, threatening investment in new content and jobs. Smaller production companies, with fewer resources to navigate IR35 compliance, face even greater risks, potentially driving consolidation or closures in an already competitive sector.

A Call for Reform

The ITV case is a clarion call for IR35 reform. The legislation’s lack of precision, retrospective enforcement, and disproportionate penalties have created a climate of fear and uncertainty. To address this, policymakers must:

 

1. Clarify Definitions: Provide clear, industry-specific guidelines on what constitutes “inside” versus “outside” IR35, reducing reliance on subjective interpretation.
2. Limit Retrospective Claims: Cap HMRC’s ability to pursue historic liabilities, protecting businesses that acted in good faith.
3. Support Freelancers: Introduce exemptions or simplified processes for sectors like media, where freelance work is intrinsic to operations.
4. Reduce Compliance Burdens: Streamline IR35 assessments to ease the administrative load on businesses, particularly SMEs.

Conclusion

ITV’s £61 million tax liability is not just a corporate headache; it’s a symptom of IR35’s fundamental flaws. Poorly drafted and punitively enforced, the legislation is strangling the creative sector, forcing layoffs, stifling innovation, and threatening financial stability. As HMRC’s net tightens, the government must act to reform IR35 before its collateral damage irreparably harms one of Britain’s most vibrant industries. The creative sector deserves better than a tax regime that punishes flexibility and ambition.

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Tax does have to be taxing.



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HMRC Bolsters Fraud Investigation Team: Will It Deliver?

In a move signalling a tougher stance on tax evasion, HM Revenue and Customs (HMRC) has announced plans to expand its Fraud Investigation Service (FIS) and increase prosecutions for serious tax fraud by 20% by 2029-30, raising the annual target from 500 to 600 cases. This initiative, coupled with intensified efforts like increased "dawn raids" and a focus on "phoenixisation" schemes, reflects the UK government’s commitment to closing the £7.5 billion tax gap. But will this expansion translate into meaningful action, achieve its goals, and target high-value offenders, or will it merely sweep up low-hanging fruit?

The Expansion: What’s Happening?

HMRC’s strategy involves bolstering its counter-fraud capabilities, with a focus on individual and corporate tax evasion. The agency has already ramped up property searches, averaging 648 "dawn raids" annually, a clear escalation in its enforcement tactics. Additionally, HMRC is targeting complex fraud schemes like "phoenixisation," where businesses use contrived insolvencies to dodge tax liabilities. The government is also introducing a whistleblower incentive scheme, modelled on U.S. practices, to encourage tip-offs on tax dodgers, potentially rewarding informants with a percentage of recovered funds.

 

This push comes amid political pressure to boost public coffers, particularly after HMRC reported a £9.5 billion VAT gap in 2023-24. The agency’s collaboration with entities like the Insolvency Service and Kent Police, as seen in a recent case uncovering a £22 million tax fraud, underscores its intent to tackle sophisticated schemes. However, the decline in prosecutions of tax fraud enablers—down from 16 in 2018-19 to fewer than five in 2023-24—raises questions about HMRC’s track record.

Will It Actually Happen?

The expansion is plausible, given the government’s fiscal priorities and public support for cracking down on tax evasion. Chancellor Rachel Reeves has secured the Office for Budget Responsibility’s approval for the £7.5 billion tax gap reduction target, lending credibility to the plan. HMRC’s recruitment of additional staff and investment in investigative tools, such as data analytics, further suggest that the infrastructure for expansion is being built.

 

However, challenges loom. HMRC has faced criticism for staff retention issues and resource constraints, which contributed to a six-year low in serious tax fraud investigations (480 cases in 2023-24, down from 1,091 the previous year). These limitations could hamper the agency’s ability to scale up effectively. Moreover, criminal investigations are complex and time-consuming, often spanning years, which may delay visible results. The reliance on whistleblowers also introduces uncertainty, as the success of the incentive scheme depends on public willingness to come forward and the quality of information provided.

Will It Be Successful?

Success hinges on how we define it. If the goal is to increase prosecution numbers by 20%, HMRC’s enhanced resources and political backing make this achievable. The agency’s £1.1 billion tax recovery in 2023-24, albeit inflated by a single £652.6 million settlement, demonstrates its capacity to secure significant sums. Partnerships with other agencies, like the Insolvency Service for COVID fraud cases, could further amplify outcomes.

 

Yet, the broader aim of closing the tax gap may prove elusive. The £9.5 billion VAT gap and £8.2 billion in inheritance tax duties collected last year highlight the scale of evasion. Critics, including TaxWatch, argue that HMRC’s data reliability issues and declining prosecution rates for enablers suggest systemic weaknesses. Without addressing these, the agency risks focusing on quantity over quality, potentially missing high-value targets. The National Audit Office has also noted HMRC’s lack of a clear strategy to combat small business tax evasion, which accounts for £4.4 billion annually.

Low-Hanging Fruit or High-Value Targets?

A critical concern is whether HMRC will prioritise easily prosecutable cases—low-hanging fruit—or pursue complex, high-value offenders. Recent trends suggest a mixed approach. The focus on "highest-harm and highest-value fraud" indicates an intent to target sophisticated schemes, as seen in the Kent Police collaboration that dismantled a £22 million VAT fraud. However, the sharp rise in inheritance tax investigations (3,961 in 2023-24, up 31% from the prior year) suggests HMRC is also leaning on straightforward cases, such as errors or undervalued assets in estates, which are easier to investigate.

 

The decline in prosecutions of enablers—those who facilitate tax evasion—further fuels scepticism. These cases are resource-intensive and require unravelling complex networks, yet they yield significant deterrence. HMRC’s claim of having 150 enablers under investigation is promising, but the drop from 16 to fewer than five prosecutions in five years suggests a preference for simpler cases. The whistleblower scheme could shift this balance by uncovering high-profile offenders, but its impact remains speculative.

Critical Perspective: Beyond the Headlines

While HMRC’s expansion is a step toward accountability, it risks becoming a performative exercise if it prioritises easy wins over systemic reform. The agency’s history of unreliable data and declining investigations undermines confidence in its ability to deliver. Political pressure may drive HMRC to inflate prosecution numbers with low-level cases, leaving wealthy tax dodgers and enablers unscathed. Moreover, the focus on individual prosecutions ignores broader structural issues, such as loopholes exploited by corporations or the underfunding of HMRC’s investigative arm.

Conclusion

HMRC’s plan to expand its fraud investigation team and boost prosecutions is feasible, backed by political will and resource allocation. However, success is not guaranteed. Resource constraints, data issues, and a history of declining investigations could limit impact, while the focus on numerical targets risks prioritising low-hanging fruit over high-value offenders. For the initiative to truly close the tax gap, HMRC must balance its pursuit of easy cases with a relentless focus on complex fraudsters and enablers, ensuring that the crackdown delivers both justice and deterrence. Without this, the expansion may amount to little more than a headline-grabbing gesture.

Tax does have to be taxing.



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HMRC’s £8,000 Blunder: A Decades-Late Apology to Women

HMRC has once again proven its knack for monumental incompetence, this time leaving thousands of women shortchanged for decades due to a "historical error" that’s only now coming to light. The blunder, which primarily affected women who gave birth in the 1980s and 1990s, has resulted in a collective compensation bill of £7,859 per affected individual—a payout that, while welcome, is a stinging reminder of HMRC’s chronic mismanagement and indifference to taxpayers’ lives.

 

Let’s unpack this fiasco. When HMRC was supposedly overseeing the nation’s tax system with the diligence of a hawk, thousands of women were systematically underpaid or denied tax relief they were entitled to. The error, rooted in the labyrinthine complexity of tax codes and HMRC’s apparent inability to administer them properly, went unnoticed—or, more likely, ignored—for decades. These women, many of whom were juggling motherhood and financial pressures in the 80s and 90s, were left to bear the brunt of HMRC’s negligence. And now, in 2025, HMRC has the audacity to pat itself on the back for “discovering” this mistake, as if stumbling upon a multi-million-pound error is some kind of administrative triumph.

 

The compensation—£7,859 per woman—might sound like a generous windfall, but let’s not kid ourselves. This isn’t HMRC’s benevolence at work; it’s a belated attempt to clean up a mess of their own making. Adjusted for inflation, the value of the money these women were owed decades ago would likely dwarf the current payout. A quick calculation using the Bank of England’s inflation calculator shows that £7,859 in 2025 is worth far less in real terms than it would have been in, say, 1990—when £3,000 (a conservative estimate of the original underpayment) would equate to over £9,000 today. HMRC’s “generous” payout doesn’t even begin to cover the lost earning potential, interest, or financial strain these women endured over the years.

 

And what of the human cost? These women, many now in their 50s or 60s, were deprived of funds during critical years—money that could have eased the burden of childcare, mortgages, or simply putting food on the table. HMRC’s error wasn’t just a clerical oversight; it was a betrayal of trust that compounded the financial insecurity of thousands of families. The tax authority’s response? A sterile letter in the post, as if a cold bureaucratic note can erase decades of hardship. No public apology, no urgent commitment to overhaul their error-prone systems—just a perfunctory payout and a hope that the issue fades from the headlines.

 

This isn’t HMRC’s first rodeo. From the Waspi women’s pension scandal to the ongoing Child Benefit overpayment debacles, HMRC has a track record of failing the very people it’s meant to serve. The organisation’s labyrinthine processes and apparent aversion to accountability have left taxpayers navigating a minefield of errors, with HMRC seemingly content to “discover” mistakes only when forced to confront them. The fact that this particular error lay dormant for over 30 years raises serious questions: How many other systemic failures are lurking in HMRC’s archives? How many more taxpayers are unknowingly owed money? And why does it take decades for HMRC to notice its own incompetence?

 

The timing of this revelation is particularly galling. As the cost-of-living crisis continues to bite, HMRC’s belated payout feels like a cruel irony—a lump sum that arrives too late to help these women when they needed it most. And let’s not forget the administrative cost of this cleanup. HMRC will likely spend millions identifying and contacting affected women, processing payments, and defending itself against inevitable criticism. That’s taxpayer money—our money—being used to fix a problem HMRC created in the first place.

 

To add insult to injury, HMRC’s announcement carries an air of self-congratulation, as if issuing these letters is some noble act of restitution. In reality, it’s the bare minimum, and it’s decades overdue. The women affected deserve more than a cheque and a form letter; they deserve a public apology, transparency about how this error occurred, and assurances that HMRC is taking concrete steps to prevent similar failures. Instead, we’re left with the same old story: an underfunded, overstretched tax authority bumbling through its responsibilities, leaving ordinary people to pick up the pieces.

 

This scandal is a stark reminder that HMRC is not fit for purpose in its current form. It’s a bloated bureaucracy that prioritises compliance over competence, leaving taxpayers to suffer the consequences of its failures. The £7,859 payout may be a lifeline for some, but it’s a drop in the bucket compared to the trust HMRC has squandered. If the government wants to restore faith in the tax system, it needs to hold HMRC accountable, streamline its operations, and ensure that errors like this are caught in months, not decades. Until then, this payout is less a victory than a grim acknowledgment of HMRC’s enduring legacy of letting down the people it’s meant to serve.

 

Tax does have to be taxing. 

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Parties Forget To Pay Tax!

 

Our new report: local political parties are renting out office space to MPs — who claim the cost on expenses.

But in most cases, they pay no tax on that income — or on rent from local businesses.

We reviewed 630 sets of accounts. What we found is a systemic failure. 🧵 pic.twitter.com/9TbRn0gxB4

— Dan Neidle (@DanNeidle) May 11, 2025

Tax does have to be taxing.



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

HMRC’s Tax Refund Fiasco: A Bureaucratic Nightmare Strangling Small Businesses

HM Revenue and Customs (HMRC) has once again proven itself to be a masterclass in inefficiency, leaving taxpayers and small businesses stranded in a quagmire of delays that stretch far beyond the already egregious four-month mark reported by frustrated accountants. The tax office’s latest debacle—processing tax refunds at a glacial pace while simultaneously axing a vital free online filing service—has sparked outrage among those who rely on timely refunds to keep their businesses afloat. This isn’t just incompetence; it’s a betrayal of the very people HMRC is supposed to serve.

 

Let’s start with the refunds, or rather, the lack thereof. Reports from professionals like Nikki Ainscough, managing director of York-based Equilibrium Accountants, paint a grim picture: refunds for overpaid tax or National Insurance, particularly under PAYE and the Construction Industry Scheme (CIS), are now taking well over four months—and in some cases, much longer. One of Ainscough’s clients, who submitted a PAYE refund request in March, was told to wait until August 2025 for their funds. That’s a five-month delay for money rightfully owed, and it’s not an isolated case. Social media platforms like X are ablaze with taxpayers venting about waits stretching to six, seven, or even nine months, with one user describing a £4,000 inheritance tax refund still unpaid after nearly a year.

 

Historically, these refunds took four to six weeks, a timeframe that, while not ideal, was at least manageable. Now, HMRC’s backlog is so severe that it’s processing requests from as far back as December 2024, leaving businesses and individuals in financial limbo. Ainscough rightly points out the stakes: “If the backlog is that big, it suggests a high volume of claims and a potentially substantial sum of money that is owing to small businesses and individuals at a time when cashflows are critical.” For small businesses already battered by economic uncertainty, these delays aren’t just inconvenient—they’re existential threats. Every pound trapped in HMRC’s bureaucratic black hole is a pound that can’t be used to pay suppliers, cover payroll, or invest in growth.

 

And what’s HMRC’s excuse? A vague nod to “backlogs” and the occasional mention of industrial action by staff handling PAYE and CIS refunds. Sure, strikes can disrupt operations, but they don’t explain why delays have ballooned to such absurd lengths or why HMRC seems utterly unprepared to address the issue. The tax office’s response is a masterclass in deflection: “We’re tackling response times for these refund claims by allocating extra staff to work on them,” a spokesperson chirped, while boasting about an 80% customer satisfaction rate. Eighty percent? Tell that to the small business owner waiting half a year for a refund or the taxpayer stuck on hold for 45 minutes only to have their call dropped.

 

But the refund delays are only half the story. In a move that reeks of tone-deafness, HMRC has announced it will shutter its free online filing service for company tax returns and accounts by March 31, 2026. This service, used by countless small businesses to file their annual accounts and calculate corporation tax, is being scrapped because it allegedly “does not meet modern digital standards or recent changes to UK company law.” Instead, businesses will be forced to shell out for commercial software, with costs starting at £15 a month or over £100 for a one-off purchase. One exasperated taxpayer summed it up perfectly: “This means people will have to subscribe to a commercial, paid product for the privilege of paying corporation tax to the government.”

 

Let that sink in. HMRC is not only delaying refunds that businesses desperately need but also piling on new costs for compliance. For small traders, local residents’ associations, or incorporated charities already stretched thin, this is a slap in the face. The free filing service, introduced in 2011 to ease the transition to online filing, was a lifeline for smaller entities with simple tax affairs. Now, HMRC is yanking it away, forcing businesses to navigate a fragmented market of third-party software providers—many of which charge recurring fees that add up quickly. And don’t expect much sympathy from HMRC; their spokesperson had the gall to claim that commercial software “provides a much better service.” Better for whom? Certainly not the small business owner already drowning in red tape.

 

HMRC’s defenders might argue that modernisation is necessary, that outdated systems must be replaced to align with the Economic Crime and Corporate Transparency Act or to combat fraud. Fine. But why is the burden of this transition being dumped squarely on the shoulders of taxpayers? Why hasn’t HMRC invested in streamlining its own processes to ensure refunds are processed promptly? Why is there no transitional support for businesses forced to adopt costly new software? The answer is painfully clear: HMRC prioritises its own convenience over the needs of the public it serves.

 

The hypocrisy is staggering. While HMRC drags its feet on refunds, it’s lightning-fast to slap taxpayers with penalties for late filings or payments. Miss a self-assessment deadline by a day, and you’re hit with a £100 fine, with interest accruing at 8.5% on late payments. Yet when HMRC owes you money, it’s perfectly content to sit on it for months, leaving you to chase them through endless phone queues or unresponsive online portals. One X user’s frustration captures the sentiment: @HMRCgovuk “How are gonna send me a cheque for my tax refund, I cheque it in, and then get told I can’t cash it cos there’s a block on the cheque, ring up for you to tell me the cheque is under investigation??? Absolute jokers.”

 

This isn’t just a failure of process; it’s a failure of accountability. MPs have lambasted HMRC for call waiting times averaging over 23 minutes and a tax system growing ever more complex. Parliament’s Public Accounts Committee warned that “taxpayers’ trust in HMRC is falling,” and with good reason. The Making Tax Digital program, meant to modernise services, has instead saddled taxpayers with hundreds of millions in extra costs. And yet, HMRC ploughs ahead, undeterred by the chaos it leaves in its wake.

 

Small businesses and individuals deserve better. They deserve a tax authority that processes refunds within weeks, not half a year. They deserve access to free, user-friendly tools to meet their compliance obligations, not a mandate to buy expensive software. Above all, they deserve respect—not the dismissive platitudes of an agency that seems to view taxpayers as an inconvenience.

 

HMRC’s leadership must be held to account. Heads should roll for this systemic failure, and resources must be redirected to clear the backlog and restore trust. Until then, HMRC will remain what it has become: a bureaucratic behemoth that punishes the very people it’s meant to serve. Shame on them.

Tax does have to be taxing.

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