New IR35 Guidance hot off the presses

[meanttobeworking]

Maybe one of the questions in the test should have been:

Does your business face the constant financial risk of having to undergo a lengthy and costly investigation into whether it's a business or not from HMRC.

Surely employees don't carry that risk...

[Lewis]

Only problem with that is that it's now up to the individual to provide 'evidence' that they are outside IR35 - it won't be a matter of negotiation until HMR&C have decided that you're not.

This step represents an opportunity to close the case early. Surely it's best the experts get involved here. e.g. they could at a minimum provide a template for a business plan (I have one in my head but I don't know how you're supposed to formally write one) and ensure you present the right evidence to HMRC in the right way - whether to avoid phone calls and deal only in correspondance etc.. I can see an inexperienced individual saying/writing the wrong thing in this early phase that could work against them in the actual IR35 case.

It would be in their interests - if they check all the info you send off, make suggestions for extra things to include etc.. they could prevent a more full blown case that would involve more effort - although maybe they would welcome all the extra business

[malvolio]

Only problem with that is that it's now up to the individual to provide 'evidence' that they are outside IR35 - it won't be a matter of negotiation until HMR&C have decided that you're not.

Not really. IR35 hasn't changed, nor has the process by which you are investigated, nor have all the usual defence processes (including pointing them at your professional defence teams. All they're going to acheive is starting a whole lot more unwinnable IR35 investigations, so wasting yet more taxpayer money.

They have no legal basis for putting these tests forward as any kind of IR35 evidence. Should they try to do so, the case would be appealed all the way up.

[Lewis]

A friend has been told by a tax advisor, that if you go out to deliberately work the test, e.g. by renting office space which you don't use. That it could be classified as active avoidance, i.e. reflect very bad on you - anyone got any thoughts on this?

[LisaContractorUmbrella]

Not really. IR35 hasn't changed, nor has the process by which you are investigated, nor have all the usual defence processes (including pointing them at your professional defence teams. All they're going to acheive is starting a whole lot more unwinnable IR35 investigations, so wasting yet more taxpayer money.

They have no legal basis for putting these tests forward as any kind of IR35 evidence. Should they try to do so, the case would be appealed all the way up.

I don't think you can say that processes for investigation haven't changed as the new tests were only announced yesterday and it would seem from the available documentation that they may well do. The IR35 tests would not be used as evidence of status in an IR35 case, IMHO they would be used to demonstrate to the tribunal that HMR&C had done everything possible to ensure that the individual had the tools they needed to be able to pay the correct amount of tax (in HMR&C opinion) and to try and convince the tribunal that this was deliberate avoidance.

[BlasterBates]

Not really. IR35 hasn't changed, nor has the process by which you are investigated, nor have all the usual defence processes (including pointing them at your professional defence teams. All they're going to acheive is starting a whole lot more unwinnable IR35 investigations, so wasting yet more taxpayer money.

They have no legal basis for putting these tests forward as any kind of IR35 evidence. Should they try to do so, the case would be appealed all the way up.

Careful... Kate Cotterel pointed out that they do now generally win their cases. Though statistics show there aren't many cases. That doesn't include the cases that settle before the case gets to court.

The message is they now feel confident that they know who they can knobble. So it's a matter of making sure your defences are in place and note that you are now dealing with an experienced opponent.

If you're floating around on a longterm contract I think you're a prime candidate.

In the past you didn't need to worry too much about being a high risk candidate, because the chances of investigation were low, but now you do.

I presume if you have insurance you probably aren't a high risk candidate anyway.

[Sockpuppet]

I don't think you can say that processes for investigation haven't changed as the new tests were only announced yesterday and it would seem from the available documentation that they may well do. The IR35 tests would not be used as evidence of status in an IR35 case, IMHO they would be used to demonstrate to the tribunal that HMR&C had done everything possible to ensure that the individual had the tools they needed to be able to pay the correct amount of tax (in HMR&C opinion) and to try and convince the tribunal that this was deliberate avoidance.

Except that if the tax payer was going on case law they would be outside and therefore not deliberate avoidance. HMRC don't make the rules, they just try to enforce them. Until the Courts decide that the new tests are worth referring to they don't mean anything legally.

If HMRC really wanted to solve IR35 they'd do something like the following.

Pay us £50 we'll review the contract and give you a pointer going forward. Either inside or outside IR35. If inside no charge. If you don't follow our guidance it will be tax avoidance.

Allow a 3rd party (e.g. accountant) to submit the review for you with no personal details so it can't be traced to a business and people might go for this.

[Lewis]

if they check all the info you send off, make suggestions for extra things to include etc..

Another example, presumably you should attach contract reviews as well and as much supporting evidence as possible to make HRMC back down. Not just answers to the tests. Something the IR35 insurers would be best to advise on.

Mal - are PCG putting any thought into what they will do when members get these letters and start calling the helpline. Will they support members in replying or say it's down to you to deal with it?

[BlasterBates]

The key difference between now and before is that HMRC are being systematic. Before it was adhoc, during routine audits an HMRC inspector would have triggered an IR35 enquiry if he suspected something, but he generally wouldn't be an IR35 expert. Now you have a focused IR35 team who have devised a set of "secret" tests to find targets, based on your tax submission, company records and I don't mean the business test, as someone said that's probably a red herring. It's just now you really have to be on your guard.

[malvolio]

Mal - are PCG putting any thought into what they will do when members get these letters and start calling the helpline. Will they support members in replying or say it's down to you to deal with it?

I'm not part of the management, but I would not be the only one jumping up and down if PCG did not support their members. Standard members get professional advice from the moment HMRC mentions IR35, Plus membership means you get it from any hint of an investigation. If you get a brown envelope from Hector, call the office.