Reply to: IR35 hypothetical - Would the end company have to co-operate?

[Fred Bloggs]

Well we'd certainly do our best (and have done so in the past). If we couldn't, that's where the TLC cover comes in of course. Unhelpful end clients are probably the biggest risk in an IR35 enquiry and it often gives us a headache.

Thanks, that is how I see it too.

[Qdos Contractor]

But......... I'll be relying on you guys to demonstrate for me that the testimony of a random personnel person at a previous client co who never met me, never knew what I did nor how it did it etc... would be as good as worthless.

Well we'd certainly do our best (and have done so in the past). If we couldn't, that's where the TLC cover comes in of course. Unhelpful end clients are probably the biggest risk in an IR35 enquiry and it often gives us a headache.

[Fred Bloggs]

Yeah, that's what HMRC will be aiming for. They'll send over a ridiculously long, cleverly worded questionnaire and will hope that it will land on someone from HR's desk. They might answer 90 of the 100 questions 'correctly', but one false move and the Revenue will pounce on it. Once it's signed by the client it would be very difficult to go back on.

But......... I'll be relying on you guys to demonstrate for me that the testimony of a random personnel person at a previous client co who never met me, never knew what I did nor how it did it etc... would be as good as worthless.

[Qdos Contractor]

Yeah, that's what HMRC will be aiming for. They'll send over a ridiculously long, cleverly worded questionnaire and will hope that it will land on someone from HR's desk. They might answer 90 of the 100 questions 'correctly', but one false move and the Revenue will pounce on it. Once it's signed by the client it would be very difficult to go back on.

[Fred Bloggs]

I had a client who told me the contractor I'd replaced was investigated, and they just kept putting off HMRC and saying they were too busy, and "in the end they went away".

That was a few years ago though.

I guess having the client on your side makes an enormous difference. What would worry me is that this sort of thing would get palmed off onto an HR numptie who didn't even know you and probably doesn't understand what a contractor is anyway.

Correct, my fears in a nutshell. Hopefully QDOS would have the skill to completely discredit that sort of evidence on my behalf but that is my biggest fear (basically, a numpty answering HMRC's leading questions).

[VectraMan]

I had a client who told me the contractor I'd replaced was investigated, and they just kept putting off HMRC and saying they were too busy, and "in the end they went away".

That was a few years ago though.

I guess having the client on your side makes an enormous difference. What would worry me is that this sort of thing would get palmed off onto an HR numptie who didn't even know you and probably doesn't understand what a contractor is anyway.

[Fred Bloggs]

It's really simple. HMRC say "you're caught" and issue an assessment accordingly. You then have to disprove it. Potentially tricky if there is no cooperation through the chain.

That's what I pay QDOS for, though I will be very happy if I never have to engage them.

[ASB]

Cheers for the reply, always appreciated.

In which case, if the contract with the agency is fine, what's to stop you saying all the right things regarding working practices, either bending the truth, or out and out lying, if HMRC can't actually check the facts with the end company?

For clarities sake, I'm not advocating the above, I'm personally not paid via a Ltd company, just posing the question.

It's really simple. HMRC say "you're caught" and issue an assessment accordingly. You then have to disprove it. Potentially tricky if there is no cooperation through the chain.

[Fred Bloggs]

Wouldn't this actually strengthen your case no end? The fact that no one else but your direct client (i.e. manager for want of a better word) knows what you are doing and you deliver seems to be a pretty dam clear sign you are outside IR35. Certainly beats everyone being your friend and you come in 9 to 5 and join in the social aspect of the office for sure!!!

They will spot someone who is all talk with no evidence a mile off so wouldn't have thought that was a problem.

I have considered that angle. I have seen cases where the client co personnel department have given evidence along the lines of "Oh we'd never allow a substitute in place of Mr Bloggs" or "We'd always expect Mr Bloggs to do exactly what his manager told him or we wouldn't have employed him" and the like. That's the kind of response HMRC would be looking for when framing leading questions to a client personnel manager designed to elicit the response that serves their purpose. A personnel manager would have no idea what I did or how I did it, but it wouldn't prevent answers being given in the way I suggest, that's more my type of concern.

[northernladuk]

In fact this thread touches on a topic I have often wondered about. Almost without exception, every contract I have had over the 8 or 9 years, there is nobody still at the client companies who worked with me or would have any knowledge of what I did or how I did it while I was in contract there. Due to most of the other people either being contractors who have left or the staff blokes have moved on or emigrated or the department has shut down. I have had no interaction with anyone at any client co in personnel departments or in the general management functions. Whilst I am sure HMRC could find somebody in the client companies who would be quite prepared to sell a "money grabbing contractor down the river to HMRC, how could any statement have any serious meaning in those circumstances?

Wouldn't this actually strengthen your case no end? The fact that no one else but your direct client (i.e. manager for want of a better word) knows what you are doing and you deliver seems to be a pretty dam clear sign you are outside IR35. Certainly beats everyone being your friend and you come in 9 to 5 and join in the social aspect of the office for sure!!!

They will spot someone who is all talk with no evidence a mile off so wouldn't have thought that was a problem.

[Fred Bloggs]

In fact this thread touches on a topic I have often wondered about. Almost without exception, every contract I have had over the 8 or 9 years, there is nobody still at the client companies who worked with me or would have any knowledge of what I did or how I did it while I was in contract there. Due to most of the other people either being contractors who have left or the staff blokes have moved on or emigrated or the department has shut down. I have had no interaction with anyone at any client co in personnel departments or in the general management functions. Whilst I am sure HMRC could find somebody in the client companies who would be quite prepared to sell a "money grabbing contractor down the river to HMRC, how could any statement have any serious meaning in those circumstances?

[LisaContractorUmbrella]

What happens when HMRC makes an enquiry
At the start of an enquiry
When HMRC sends a notice of enquiry to your company, you - and your Corporation Tax agent if you've got one - will be told whether HMRC is making an enquiry into:
the whole of your Company Tax Return - including company accounts, tax computations and other supporting documents
one or more specific areas or aspects of your return
a claim or election you've made separately from your return
At the same time HMRC will tell you:
what information is needed
the deadline for providing this information
your company or organisation's rights and responsibilities
What information HMRC can request from your company or organisation
The information your company or organisation will need to supply during a compliance check will depend on what HMRC is enquiring into.
But HMRC can only ask you to provide information or documents that they need to check your company or organisation's Corporation Tax position.
You (or your tax adviser) should normally be able to provide any information on which your Company Tax Return was based.
Time limits for supplying information
HMRC will normally ask you to provide the documents and information it needs within 30 days. If you think you need more time it's important that you contact HMRC straightaway to discuss this. You'll find contact details on the notice of enquiry HMRC sends you.
If you don’t have the information that HMRC has requested, or you think their request is unreasonable or not relevant to the check, please let them know immediately.
What happens if your company or organisation doesn't supply the information requested
If you don't supply the information HMRC has requested, HMRC will issue a formal legal notice requiring you to provide it. If you don't then provide the information, you may have to pay a standard penalty of £300. You may also have to pay additional penalties of up to £60 per day until you supply the information.
You can appeal against this notice or any penalty charged by HMRC for not supplying the outstanding information.

I don't know for a fact but I would assume that HMR&C would consider statements from your client to be 'relevant' to an investigation which determines IR35 status. They can also request a meeting with the client but as far as I know there would be no obligation to attend

[Wanderer]

Surely there has to be some regulation that compels companies to co-operate with tax enquiries

Other than the road traffic act, I don't think there are many laws that require you to co-operate with the authorities.

[centurian]

Surely there has to be some regulation that compels companies to co-operate with tax enquiries - and I doubt there is a blanket exemption for defence related companies. The old "if we told you, we'd have to kill you" line is unlikely to wash - I am sure HMRC would have security vetted inspectors trained to deal with such organisations.

Whether HMRC would push whatever powers they have for the sake of investigating one contractor is another matter.

[pippin]

Cheers for the reply, always appreciated.

In which case, if the contract with the agency is fine, what's to stop you saying all the right things regarding working practices, either bending the truth, or out and out lying, if HMRC can't actually check the facts with the end company?

For clarities sake, I'm not advocating the above, I'm personally not paid via a Ltd company, just posing the question.