IR35 Helpline - Curse or Cure?

Would you recommend your clients use HMRC's helpline?

We now know, courtesy of the last IR35 Forum meeting held on 1st August, that HMRC's Contract Review Service (CRS) helpline is the least used of all the employer helplines. Rather than admitting that this is down to contractor's scepticism and suspicion of the helplines' motives, the Revenue have adopted an ostrich-like attitude, preferring to believe that this is due to a general lack of awareness of IR35.

The CRS helpline, located in Northampton, is currently manned by three experienced status inspectors. Calls to the helpline can take up to 45 minutes or longer, although the average call length is approximately 15 minutes. 

During the year ended 31st March 2013 the CRS helpline received 80 requests for opinions as to whether a specific contract was inside or outside of IR35. Of those requests, only 10 written opinions were given, with 70 cases outstanding because of:

 

Still working

7

Phone requests (no contract) 

28

Draft or generic contract

12

No written contract

13

No sight of upper level contract

5

Handed off to a specialist CS team

1

Request withdrawn

1

Not an IR35 intermediary 

3

 

Back in May 2012 when HMRC announced their new and improved approach to IR35, HMRC reminded freelancer's that they could have their contracts reviewed by their specialist team and where it is concluded that a contract falls outside of IR35 the Revenue will give the freelancer a certificate with a unique number. This certificate will be valid for 3 years. Should HMRC then open an IR35 review at a later date, the contractor simply advises the Revenue of the number. At this point the IR35 review is suspended to enable HMRC to consider all the information and the enquiry will be closed down if:

  • the contract HMRC reviewed is typical of the freelancer's engagement terms and conditions 
  • the information provided is accurate

Sounds a simple but effective way for a freelancer to obtain assurance about their contracts and head off any future IR35 enquiry at a very early stage. It is however the writer's personal opinion that more often than not the CRS will want to contact the end client to verify information about the contractor's working practices and what freelancer wants their client inconvenienced in this way?

What if the CRS deem a contract to be caught by IR35, what then? HMRC have been at pains to point out that the CRS act totally independent of the compliance teams and all information remains confidential. Is anyone buying that because I, for one, am not. Are we really expected to believe that where the CRS comes into possession of facts that clearly point to a contract falling inside the IR35 legislation they are going to keep mum and not share that information with their colleagues, even if it means the Treasury being deprived of much needed PAYE tax and NIC? 

A good number of years ago I locked horns with one of the status inspectors who helps man the CRS helpline, during an IR35 enquiry. The enquiry was unnecessarily protracted due to this inspector's sheer obstinacy in refusing to accept end client evidence about key status tests, always wanting more evidence despite there being sufficient evidence that, again in my opinion, was quite sufficient to point towards the existence of a contract for services. In the end HMRC accepted that my client's contract was not the subject of IR35. 

I would be very surprised if that status inspectors' attitude has mellowed or changed over the passage of time, so if your clients seek your advice as to whether to use the CRS do make a point of warning them that they may be inviting the devil to dinner! 

By:Qdos

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