Only two months into the New Year and so far, two IR35 cases have already been closed in favour of the contractor. Despite HMRC’s focus on IR35 reform, they appear to be increasing their activity with an average of one new case a day being notified to us over the past two weeks alone.
Whilst this is a mixture of both IR35 and general enquiries, it’s clear that IR35 reform in the public sector and impending reform in the private sector has not prevented HMRC from undertaking the usual IR35 enquiries in the meantime.
Interestingly, one of the recently closed cases appeared to begin as a Corporation Tax enquiry. The opening letter indicated that IR35 may be a potential issue by questions which were raised regarding the operation of PAYE.
Lo and behold some time later the client received formal notification that HMRC were making enquiries regarding IR35. Whilst unusual, this is something which could happen again with HMRC having the ability to share information between departments.
The other case is notable mainly to highlight HMRC’s failings. The case was ultimately closed because HMRC were unable to verify information with the end client. Their reasons for not being able to get hold of the information was not provided, but the closing letter followed a complaint having to be made to HMRC for the lack of any response from HMRC to information provided by the contractor. HMRC advised that the HMRC inspector originally dealing with the case had retired and it seems that another Inspector had not been assigned to the case.
This is not the only time retiring Inspectors have caused delays with enquiries, and only this week Qdos were set to hold a meeting with HMRC at our offices which was cancelled in the last hour (despite this having been arranged long in advance), because the Inspector had retired, and a replacement had not been appointed.
Whilst the year has started off well for Qdos’ clients - for HMRC, things seems as chaotic as ever, which doesn’t bode well for future change. Whilst the UK’s businesses are setting out to get their houses in order to prepare for further IR35 reform, HMRC should perhaps take a look at their own internal operations, which at the moment do not appear to be running particularly smoothly and at the detriment to; yes you’ve guessed it - the taxpayer.
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