How to make it through an IR35 investigation

Receiving an enquiry letter from HMRC is a daunting experience. It’s a little bit like seeing a policeman; you instantly feel guilty and start doubting yourself even though you know deep down you haven’t done anything wrong.

However, it needn’t be so scary. The truth is that anybody can be investigated, no matter how compliant you are. A little careful preparation and firm but polite interaction should get you through an investigation with a happy outcome.

  1. Be compliant.
    This sounds just too obvious but it’s an important point. Having a professional review of your written contracts and working practices is necessary to assess your compliance. Without an assessment, how do you know you are paying your tax and NICs correctly? Where you are found within the scope of the legislation, ensure that you apply a deemed payment at the end of the tax year.
  2. Get your end client on board.
    One of the ways in which HMRC might obtain information is directly with your end client. Make sure that your end client understands the terms of your arrangement and will answer HMRC’s questions accurately. You may also wish to obtain some written confirmation of your real working arrangements such as with a confirmation of arrangements document.
  3. Be organised.
    Not only does being organised mean you should be less stressed during an investigation (there’s nothing quite as frustrating as not being able to find that contract when you really need it), but it also encourages you to keep helpful documents you might normally have thrown away. A file with your written contracts, confirmation of arrangements forms, assessments and so on should be normal practice, but you might also wish to consider keeping relevant correspondence with your end client, employment lists which went around without your name on it, and so on.
  4. Inform your insurance provider and accountant before speaking with HMRC.
    When HMRC send you a letter, the panic it causes can lead to a quick and ill-thought response sent back, however you should keep your calm and contact your insurance provider first, if you have one. Qdos deal with HMRC from day one so you never need to. Alternatively you will need to inform your accountant, as it is likely they will need to provide some documentation for you and some professional advice may be beneficial.
  5. Be helpful.
    If you are dealing with HMRC by yourself, it is important to be helpful to them. Provide any documentation they request in a timely manner. Your organisation will make this a much easier task to handle. There is also no use in getting flustered or angry with them, you’re in an enquiry now, better just deal with it.
  6. Refuse meetings.
    HMRC may request a face-to-face interview with you. Qdos advise you to politely refuse these meetings and insist upon written interactions. As the inspector will not provide you with the questions in advance, you cannot carefully form your answers prior to the meeting, which will likely lead you into using employment language by accident (as we all use it naturally) and flustered responses which might not be what you actually meant.
  7. Evaluate other information.
    Often HMRC might obtain information from a third party, usually your end client. Insist upon assessing this information, point out if the informer was an ill-advised choice and correct any fallacies present.

If you are concerned about having an IR35 investigation, consider taking out some enquiry insurance or even full IR35 insurance, although you will need to do this before you receive a letter. Qdos offer two options for different budgets and levels of cover required, but both policies include full enquiry cover including representation during an IR35 enquiry from day one all the way to tribunal.
If you have received a letter already however, do get in touch as our consultancy and representation services are still available to you.

By:Jane Hailstone

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