The essential evidence checklist to fight an IR35 investigation

25th August 2017
Written by Qdos Contractor

Vital evidence contractors should gather ready for an IR35 enquiry

We now know that HMRC is preparing to conduct its initial compliance checks on public sector IR35 reform before long. Regardless that the responsibility and liability for setting IR35 status now rests with public sector engagers and not contractors, gathering evidence to present to HMRC or challenge an IR35 decision remains a wise move. Nobody wants to be wrongfully placed inside IR35.

In the public sector, HMRC will first be dealing directly with clients and agencies, but in typical fashion they will not be shy about requesting information from contractors should they feel the need to get a fuller picture of the working arrangement.

Increased activity in the public sector does not mean the taxman will take his eye off the private sector though. As the Government continues its seemingly relentless clampdown on what they believe to be widespread tax avoidance, it’s essential that as a contractor, you are prepared in the event of an IR35 investigation, whichever sector you work in.

While public sector clients and agencies are beginning to make more well-informed, accurate IR35 decisions, it’s vital that you gather evidence in the event of an IR35 investigation or wrongful decision.

Get an expert IR35 contract review

Before you start a new project, make sure you have a detailed, written contract which clearly outlines your working arrangements. Once you have a contract in place it’s advisable to ask an unbiased, independent professional to carry out an expert IR35 contract review of not just your written contract, but your actual working relationship. Show HMRC that you’ve taken the initiative.


Build your brand and gather your stationery

IR35 legislation came about to prevent disguised employment and put a stop to contractors enjoying the tax benefits of working through their own limited companies when – in HMRC’s eyes – their working arrangement is no different to that of an employee.

With that in mind, it’s important that you show HMRC that you are a genuine business, not operating as a ‘disguised employee’ and sit safely outside IR35. Your own company website, business cards and letterheads will help build your case.


Consider protection

Businesses typically protect themselves with insurance. Contractors should too. Whether you take out Professional Indemnity insurance or Public Liability Insurance cover, anything to strengthen your claim to HMRC that you are indeed a genuine business is vital. 

IR35 is a complex and changing legislation which can easily be misinterpreted. IR35 insurance also brings peace of mind should you be investigated by HMRC, with the option of covering any tax or NIC liabilities, interest and penalties should you be ‘caught’. The vast majority of cases that HMRC win, are where the contractor has no expert representation.


Obtain a confirmation of arrangements

A Confirmation of Arrangements (CoA) letter or document is quite possibly the best form of evidence in the event of an IR35 enquiry. It demonstrates your actual working practices directly from the end user, indicating that you are both in complete agreement with regards to your IR35 status.

However, a CoA is somewhat redundant in the public sector now, given it is the client who will be assessing IR35 status themselves. The ESS Tool, usually used to set employment status has in many respects replaced it.

For private sector contractors though, a CoA can prove to be a vital piece of evidence outlining to HMRC that you are working outside IR35. The document itself should show that you do not work under supervision, direction or control (SDC), are able to provide a substitute and emphasise to HMRC that your working arrangement is that of a self-employed consultant, and not an employee.


Collect supporting documentation

Keep anything and everything that could support your case. From contracts, emails and paper trails, right through to security badges, the more you can provide HMRC should they begin an IR35 investigation, the better.

For more IR35 help, support and advice on how to survive an IR35 enquiry, download our in-depth guide, here.

Qdos Contractor
Written by
Qdos Contractor
Award-winning providers of insurance for the self-employed, Qdos are the leading authority on IR35, offering industry-leading employment status services to ensure the flexible working industry thrive. Qdos are the Best Contractor Insurance Provider 2022 and won the Queen’s Award for Enterprise in Innovation 2022 and 2017. 

Have a question?

Ask away! One of our team will get back to you!

Prefer to talk to us in person?

Call our team on 0116 269 0999 or we can call you back at a time that suits you!