Letter - Cabinet Office requirements to confirm the tax arrangements of temp contract

[5000]

I completed a contract with the MoD a number of months ago (limited co via agency). I have recently received an e-mail (to my personal account) requesting that I respond to a IR35 letter (as per the below). They've kindly given me 1 week to respond. I've dug out the contract and have confirmed that there is no obligation to do so.

I draw a nominal salary + dividends. If it comes to an IR35 investigation I should be able to build a decent case. I've regrettably not taken out an IR35 insurance policy.

This contract represents my only foray with a public sector client. Is this a standard letter? Advice on the best approach for dealing with it would be appreciated


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Dear Mr...

The Ministry of Defence are mandated by the Cabinet Office to determine the tax arrangements of all Temporary Contractors.

Therefore in line with the Cabinet Office requirements for Government Departments to confirm the tax arrangements of Temporary Contractors, I would be grateful if you could provide evidence of one of the following.

A) If you are paying the Temporary Contractors taxable contributions through a PAYE deducted at source arrangement.

- Evidence of contributions is required to satisfy the Cabinet Office Audit team, this can be through payslips which show the salary and PAYE and NICs deductions.

B) If you are within the scope of IR35 an assurance can be provided that a tax payment will be made at the end of the tax year. This can be evidenced by providing a statement that commits you to the tax payment, or by providing a “deemed calculation”. This is a calculation that requires a worker to consider all the income for the year from a particular contract that is within IR35, make a ‘deemed payment’ to HMRC for employer NICs and pay employee NICs and PAYE on the remainder of the income.

C) If you are not paying tax via a PAYE arrangement, you must provide either a certificate from HMRC indicating that you are low risk for IR35 or your Personal Service Company’s result on the HMRC Business Entity Test
All evidence provided will be assessed by an Internal Assurance Panel. Please be aware that production of evidence does not guarantee that the Assurance Panel will accept compliance and that they may require further evidence to be provided.

Please send your soft copy evidence required to [email protected] by...
If assurance is not provided, the Ministry of Defence will need to comply with the Cabinet Office guidelines and pass information that allow HMRC to investigate further.

If you have any questions regarding this process in the first incident please email [email protected].

Thank you for your co-operation


Yours sincerely

Andrew Stafford
Hd Civilian Personnel

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[cojak]

Are you a member of the PCG? If you are then CALL THEIR TAX ADVICE LINE.

If you're not then read these... How to handle an IR35 investigation :: Contractor UK
IR35 test l How will I know if I am caught by IR35 and what will it cost me? :: Contractor UK
IR35 investigations what contractors need to know :: Contractor UK

...and contact your accountant immediately.

[Clare@InTouch]

We've seen a few of these, and it's nothing to worry about too much as long as you're outside of IR35. This bit:

"If you are not paying tax via a PAYE arrangement, you must provide either a certificate from HMRC indicating that you are low risk for IR35 or your Personal Service Company’s result on the HMRC Business Entity Test"

means you simply need to compare your working practices to the Business Entity Tests (otherwise known as HMRC's wishlist) and write back showing how you are low risk.

But also give the PCG a call as per Cojak's email above.

[TheFaQQer]

Dear Mr Stafford,

Thank you for your letter dated <date>.

I am not a temporary contractor engaged by the Ministry of Defence, so I am unable to help you with your enquiries.

Best regards,

<self>

[northernladuk]

We've seen a few of these, and it's nothing to worry about too much as long as you're outside of IR35. This bit:

"If you are not paying tax via a PAYE arrangement, you must provide either a certificate from HMRC indicating that you are low risk for IR35 or your Personal Service Company’s result on the HMRC Business Entity Test"

means you simply need to compare your working practices to the Business Entity Tests (otherwise known as HMRC's wishlist) and write back showing how you are low risk.

But also give the PCG a call as per Cojak's email above.

But this is pretty difficult and most of us will be medium pushing high risk. I went over the questions and I only managed 11 with 10 being high risk.

[TheFaQQer]

But this is pretty difficult and most of us will be medium pushing high risk. I went over the questions and I only managed 11 with 10 being high risk.

I have an unfettered right of substitution, no mutuality of obligation and absolutely no direction and control exercised by the client. I work from my own premises, using my own equipment. I work the days and hours that I want to - if I am unavailable, I tell the client that I am not available. I have PCG+ membership and TLC35 insurance just in case.

I scored 10 points, putting me in the high risk category

[northernladuk]

I have an unfettered right of substitution, no mutuality of obligation and absolutely no direction and control exercised by the client. I work from my own premises, using my own equipment. I work the days and hours that I want to - if I am unavailable, I tell the client that I am not available. I have PCG+ membership and TLC35 insurance just in case.

I scored 10 points, putting me in the high risk category

Great isn't it. What is the one point you dropped? The business plan one?

[Clare@InTouch]

That's why the BET isn't realistic, it doesn't reflect the actual legislation but rather what HMRC would like it to be.

Their new guidance is pretty much the same. An interesting read, but based on their BET rather than case law.

http://www.hmrc.gov.uk/ir35/intermed...ation-ir35.pdf

[jamesbrown]

I have an unfettered right of substitution, no mutuality of obligation and absolutely no direction and control exercised by the client. I work from my own premises, using my own equipment. I work the days and hours that I want to - if I am unavailable, I tell the client that I am not available. I have PCG+ membership and TLC35 insurance just in case.

I scored 10 points, putting me in the high risk category

Similar situation, but I think I score slightly over 20 because of the efficiency test, i.e. fixed price work helps. Utterly pointless test for determining IR35 status, though, I agree (most obviously, a "business entity" is not a single contract), and presumably also useless for targeting since they are not widely used/required before being targeted.

[TheFaQQer]

Great isn't it. What is the one point you dropped? The business plan one?

Yes. I'm sure I could write one, but if it's only going to move me marginally one way, then it's not worth the time.

I say "BRING IT!" and let Qdos fight it out for me.