An IR35 investigation can be an incredibly stressful time, just ask anyone who has been through one. Due to the uncertainty and opinion-based nature of the legislation, even the surest of compliant contractors will begin to doubt themselves when HMRC start investigating.
Prevention is always the best form of defence. Take the necessary steps to ensure you are being compliant and be prepared for a potential investigation by:
Remember that you need to check your compliance with every contract and if anything changes during your contract as well. Independent reviews are important and inexpensive (Qdos offer free basic reviews with their business insurance), as in the event of you being charged after an investigation, your penalties will be reduced or levied entirely if you can show you took ‘reasonable steps to ascertain your status.’
It is also advisable to take out some IR35 defence insurance which gains you an expert to fight your corner for you. This professional representation could be the difference to winning or losing your case. Qdos offer this insurance or you can opt to have further insurance which will cover your liabilities, penalties and interest should you be charged with them (limits apply). This same representation can be costly if you wait to be investigated.
No matter how prepared you are and how much time you put in to ensuring your compliance with the IR35 legislation, anyone can be investigated. HMRC will first send you a letter requesting contracts relating to a specified accounting period and evidence to support your believed IR35 status. If you have taken out some defence insurance, you should immediately contact your insurance provider prior to responding to HMRC (Qdos deals with cases from the first letter so you do not need to deal with HMRC at all). Otherwise, here are some helpful tips for dealing with HMRC in an enquiry and investigation:
An investigation will either close after HMRC have had sufficient evidence from you proving your status, or it may lead to a Tribunal hearing (you will have the opportunity to appeal HMRC’s decision prior to a hearing) if they decide that IR35 applies.
There is a wealth of free information and guidance on IR35 available at our IR35 Advice Centre, including example cases and enquiry letters, so ensure you have an understanding of the legislation and take advantage of our competitive policies and invaluable review services to ensure a happy future in contracting.
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