How a confirmation of arrangements letter can help in an IR35 enquiry

A Confirmation of Arrangements (COA) is exactly what it says, a letter designed to support your written contract

We have many clients every day who are concerned about the IR35 legislation and how it affects them. Often we will speak about the importance of the reality of a contract (working practices) over the written terms, which will frequently lead clients to questioning how they prove their working practices when they already have a written contract which is in fact a true representation of their working relationship with their end client.

The truth is that it is very difficult to truly prove your working practices as it is something an inspector would never see first-hand.   Those at the end client’s business who answer HMRC’s questions do not always truly understand or even witness the manner in which you work (a member of HR for example). HMRC have been known to throw aside a written contract if they do not believe it to be true.

A Confirmation of Arrangements (COA) is exactly what it says. It is a letter which is designed to support your written contract, confirming the arrangement you have with your end client. This letter is not legally binding and does not add to the actual contract, but it does allow the opportunity to highlight important aspects of your contract within supporting documentation and confirm that your end client (usually a person of authority who you deal with regularly) agrees that it is true.

The letter should address the key status tests for determining your IR35 status, such as your right to provide a substitute, your autonomy in working method and non-mutuality of obligation and be printed on your own company headed paper. The letter will need to be signed by a member of your end client who is directly involved in the provision of your services and ideally their business card should be attached. You can find a template letter here to which you can add or remove to suit your personal needs.

Although the confirmation of arrangements letter can be beneficial in an enquiry, deterring HMRC from further scrutiny and ending an investigation earlier, it is important to remember that if not properly completed, a confirmation letter can be used against you (if it in fact highlights discrepancies in your contract for example). You can send your confirmation letter to [email protected] for review prior to presenting it to your client, to ensure that it will be nothing but beneficial to your case.

What if my client won’t sign the letter?

It is not uncommon for clients to be reluctant when asked to sign documents, particularly in large organisations. You should point out to your client that the letter is not legally binding and that they would have to provide this information to HMRC in the event of an IR35 investigation anyway. If they will still not sign, seeking verbal agreement to the points in the letter may at least provide you with peace of mind that HMRC should be satisfactorily responded to during an enquiry, however, do not jeopardise a contract or lose rapport with a client for the sake of this document. Ensure that your working practices are compliant and that there are no discrepancies with the written contract, regardless of any supporting documentation.