HMRC begin reopening IR35 enquiries

With the Coronavirus pandemic to contend with, and IR35 reform just around the corner, HMRC have begun reopening IR35 enquiries.

The pandemic has certainly had a knock-on effect concerning HMRC compliance activity, not only in delaying the introduction of the off-payroll reforms, from April 2020 to April 2021, but also in applying a momentary pause to ongoing enquiries.

However, this pause appears to be coming to an end.

HMRC’s careful approach to resurrecting enquiries

IR35 enquiries that were previously paused are now being resurrected. Albeit, HMRC seem to be adopting a more tentative approach given the effects of the pandemic. One of the latest letters we have received states:

“I am writing to ask whether you are ready for HMRC to resume compliance activity regarding our IR35 enquiry (reference above). Please let me know at your earliest convenience so that I may progress the review to the next stage…”

The letter is accompanied by some general information relating to support that can be provided by HMRC in light of the pandemic. It also gives the client under enquiry the opportunity to divulge any circumstances caused by Covid-19 which may make it difficult for the client to have the enquiry re-opened.

Are HMRC likely to reopen all previous enquiries?

Whilst not all of our IR35 enquiries have been reactivated we anticipate that it is only a matter of time until they are all re-opened. This is unless there are any circumstances, which HMRC accept, where clients have been adversely impacted by Covid-19. An example of which being ill-health.

Remember that with new IR35 enquiries being opened now prior to April 2021, HMRC will be making their enquiries as the IR35 rules currently stand. This means that contractors themselves will be liable for the additional tax if determined to fall inside of IR35 by HMRC.  Because of this, it is still imperative to ensure that you have your contract and working practices reviewed for each engagement.

Is HMRC’s compliance activity now expected to return to normal?

It does appear that HMRC’s compliance activities are picking up pace once again. In addition to reopening previous enquiries, HMRC are also starting to open new enquiries. Qdos have been notified of a number of claims over the last few weeks.

Not only are there new and previous enquiries to contend with, but HMRC are opening Corporation Tax and Section 9A enquiries, and continue to pursue contractors involved in what HMRC perceive to be tax avoidance schemes.

With the effects of the pandemic on the UK economy, it is not surprising that HMRC’s compliance activity seems to be increasing in all areas. The Treasury will be looking for the effects of HMRC’s compliance activity to contribute to its rapidly depleting resources, particularly if such contributions are derived from perceived tax avoidance.

With over 25 years of expertise in tax, Qdos provide award-winning compliance and tax advice to contractors.  If you are notified of an enquiry and need some help, do not hesitate to contact us. Together we can discuss your specific circumstances to explore how we can best help provide you with peace of mind.Get in contact with a member of our team to discuss your options.