IR35 - What happens if previous ClientCo has closed\staff moved on

[Contreras]

Don't know if PCG do one, but there is a free one available on the Qdos website.

QDOS: Resources - IR35 Hub
B&C: Bauer & Cottrell - Status/IR35 Information sheets

[SarahL2012]

Out of interest with regards to an IR35 investigation what would happen in the following scenarios if HMRC were to try and speak to previous clients?

1) Previous ClientCo has ceased trading
2) All relevant people you may have been working with\alongside\hired by have moved on to new jobs in different companies.

Pretty sure one of the recent IR35 cases made reference to the client employee being interviewed not actually being there at the same time as the contractor - but he was able to speak on behalf of the client anyway. Might try and google later to see if I can find that bit again.

I have got COA letters in place a couple of times now. Once was at renewal time when it was a case of 'if you want me then sign this' and the other was a business where they were paranoid about employment claims and I told them that it would help both parties out with HMRC if they signed. I'm confident both contracts were outside IR35 but if it heads an enquiry off at early stages then its worth it.

Trying to get one at current client co but it went off to their Legal team for review 12 weeks ago and I don't hold out much hope of it resurfacing in a useful format.

[ChimpMaster]

Excellent, thanks for the CoA documents guys. I will get these signed by the client management (I am direct, no agency).

[northernladuk]

Excellent, thanks for the CoA documents guys. I will get these signed by the client management (I am direct, no agency).

Just make sure the people that sign it are the ones that have authority to do so. I am sure you know but the client manager signing it when HR are the ones that ultimately decide is worthless. Best bet is to get them all to sign it.

[SussexSeagull]

So what powers do the HMRC have to make former managers, etc. at ClientCo help them with their enquiries?

[LisaContractorUmbrella]

So what powers do the HMRC have to make former managers, etc. at ClientCo help them with their enquiries?

Thumbscrews probably.

Why wouldn't they though - your IR35 status will have no impact on ClientCo

[Fandango]

Cheers for the replies

I've not had an investigation, nor am I currently in the process of receiving one it was more out of curiosity as I'd heard that a former ClientCo had lost some fairly substantial government contracts and the office where I'd previously worked had been closed and pretty much all the staff I'd worked with had moved on to new companies. So if at any point in the future I have an investigation I was just wondering what sort of lengths HMRC goes to to try and ascertain your working practices if its not initially easily obtained. I don't feel I have anything to worry about, as I said its was more from a curiosity point of view.

I've always had my contracts checked by QDOS but I've not as yet had a CoA however I'll certainly be looking to get one signed on future contracts

[malvolio]

Must confess I've always had my doubts about a CoA letter. The question it would raise in HMRC's (and possibly the court's) mind is why is it necessary; does the contract not truly reflect the nature of the working arrangements? If not, why not? What are you trying to conceal...?

Two edged sword, IMVHO, better to get the contract right. CoAs only really add value in that they clarify the relationship between you and your line manager, they are a potential risk to the overall contract.

[TheFaQQer]

Must confess I've always had my doubts about a CoA letter. The question it would raise in HMRC's (and possibly the court's) mind is why is it necessary; does the contract not truly reflect the nature of the working arrangements? If not, why not? What are you trying to conceal...?

The contract between agency and contractor doesn't necessarily reflect the contract between agency and client, and you won't have sight of that contract. A CoA may help resolve any of those differences, or at least (if the client says that they won't sign because it isn't true) flag up where you would have issues if investigated.

[Contreras]

It would be a question of the contractor trying to make contact with those individuals to ascertain if they would be prepared to provide evidence, assuming that the contractor did not have sufficient evidence in the first instance to settle an IR35 enquiry.

Should it not be possible to track any of these people down then it will be a question of settling the enquiry based upon the evidence readily available. This, of course, could leave a contractor at the mercy of the HMRC if such evidence is not conclusive, as the Revenue may well interpret it in their favour and if neither party could agree then an appeal would need to be progressed to the tax tribunal. This could be cost prohibitive depending on the amount of tax & NIC at stake.

This is why it is so important to gather evidence in real time, e.g. confirmation of arrangements.

I'm finding it a little hard to reconcile how HMRC, with only the contract as hard evidence, could be so sure of their position to want to defend it at a tax tribunal.

- The contract was already expert reviewed (say, by QDOS) so at worst it would be only borderline IR35.
- Client Co. has ceased to exist for whatever legitimate reason, i.e. no suspicion of tax evasion.
- The working practices are based on statements from the contractor alone.
- Contractor has repesentation (say, QDOS), very unlikely that anything stated would put him inside IR35.

Surely this is a lost cause for HMRC? They can speculate all they like about the contractor's working practices but are they really going want to defend this position when the contractor takes them to tribunal?