Reply to: IR35 review

[jamesbrown]

If the insurance company is going to withdraw their support as soon as things get tricky, then where does that leave the contractor??

I pay insurance cover to protect me from an HMRC investigation - I believe that each contract I do is outside IR35 for a number of reasons, but that doesn't mean that someone else will take the same position as I do. So, I think it's defendable, you say it isn't, the insurance company withdraws it's support, I lose the case.

I don't see the risk that the insurance company takes if this is their approach.

That's precisely why IR35 insurance has always struck me as being a complete waste of money, as opposed to, say, PCG+ membership. With IR35 insurance you're effectively insuring against that sliver of risk whereby a case is deemed worth pursuing, but is subsequently lost. Since most insurers require some due diligence prior to offering their product (e.g. a contract/wp review) and the probability of failure is low, I imagine this insurance product is rather successful...for the insurers.

[northernladuk]

If the insurance company is going to withdraw their support as soon as things get tricky, then where does that leave the contractor??

I pay insurance cover to protect me from an HMRC investigation - I believe that each contract I do is outside IR35 for a number of reasons, but that doesn't mean that someone else will take the same position as I do. So, I think it's defendable, you say it isn't, the insurance company withdraws it's support, I lose the case.

I don't see the risk that the insurance company takes if this is their approach.

Gotta be pragmatic here though. I am sure these types of cases will be in examples where people have done zero diligence and are claiming outside in a clearly inside situation thinking they won't get caught or something. If that is the case they they deserve to be left on their own. Every single insurance requires some level of compliance or diligence. I am not watching my premiums rise due to people buying it and sitting pretty thinking they are safe so don't have to lift a finger. Kate did point out that they took on weak cases and won so will be have to be pretty rare and clear cut failures for be stranded by the sound of it.

[TheFaQQer]

If the claim is not defendable then we would say so and in our experience of two such cases the underwriter withdrew support.

If the insurance company is going to withdraw their support as soon as things get tricky, then where does that leave the contractor??

I pay insurance cover to protect me from an HMRC investigation - I believe that each contract I do is outside IR35 for a number of reasons, but that doesn't mean that someone else will take the same position as I do. So, I think it's defendable, you say it isn't, the insurance company withdraws it's support, I lose the case.

I don't see the risk that the insurance company takes if this is their approach.

[northernladuk]

IR35 enquiries: the seven questions that deserve an answer from HMRC now

I would rather then didn't answer them and so open a can of worms that clearly makes HMRC look bad so they decide to act on.

Leave it in a corner quietly rather than pushing them to fix it

[Kate Cottrell]

And a question that has popped up a couple of times. What happens when you have someone with insurance that is in what appears to be a pretty indefensible position, i.e. a PPI claims handler for example, no subs, MoO in place. Do you defend them anyway as HMRC can't win anything or do refuse to represent them? Or do you do some diligence before offering the insurance?

B&C do not sell insurance (legal expenses or tax losses)but we are claims handlers for some firms. The important point to remember is that in these cases the B&C client is the insurance company and not the contractor. Once an investigation starts we are required to undertake a thorough review and advise the insurance company's underwriters if there is a "reasonable chance of success" with the claim. If the claim is not defendable then we would say so and in our experience of two such cases the underwriter withdrew support.

There is absolutely no substitute for due diligence by taking the right advice at the right time i.e. considering every contract, extension and renewal and the WORKING PRACTICES, ideally before signing. The insurance (if needed) should then flow from this point. There is little comfort to be had from purchasing any defence product (insurances, guarantees or all inclusive memberships) if the engagement covered is inside IR35.

Yes we have won many cases over the years that were weak but perhaps they now belong in the old IR35 arena given that we are now dealing with HMRC IR35 specialist teams. We will always try to help any contractor faced with an investigation but we do not give anyone false hope.

Kate Cottrell

[jamesbrown]

At some point we will no doubt see an FOI asking how the world has changed since the last time. That would be informative; especially if the HMRC win ratio hasn't improved.

IR35 enquiries: the seven questions that deserve an answer from HMRC now

[malvolio]

Agree with Kate, broadly. AIUI the compliance unit is being beefed up and the drop in cases is being reversed They are also getting better - or perhaps a little more selective - at targetting people and resolving them more quickly.

At some point we will no doubt see an FOI asking how the world has changed since the last time. That would be informative; especially if the HMRC win ratio hasn't improved.

[northernladuk]

In B&C's cases the Contractors of course! We still have our 100% win record!

And a question that has popped up a couple of times. What happens when you have someone with insurance that is in what appears to be a pretty indefensible position, i.e. a PPI claims handler for example, no subs, MoO in place. Do you defend them anyway as HMRC can't win anything or do refuse to represent them? Or do you do some diligence before offering the insurance?

[northernladuk]

I would wait for the actual figures from HMRC rather than listening to people who may have a interest in contractors worrying about being investigated. If they have gone from double figures in 2011 to over many hundreds then I might think about getting some insurance. However based on the ineffectiveness of the legislation I doubt HMRC are pouring loads of money into it.

It maybe ineffective but it can still land on your doorstep and require defending, albeit easily.

But you save your £150 or so (and claimable for tax). Go for it.

[proggy]

I would wait for the actual figures from HMRC rather than listening to people who may have a interest in contractors worrying about being investigated. If they have gone from double figures in 2011 to over many hundreds then I might think about getting some insurance. However based on the ineffectiveness of the legislation I doubt HMRC are pouring loads of money into it.

[Kate Cottrell]

Great post and useful input as always Kate thank you.

Just a quick question.. Getting settled quickly in who's favour?

In B&C's cases the Contractors of course! We still have our 100% win record!

[northernladuk]

IR35 investigation cases - yes on the increase and in our experience they are being settled very quickly. We defend cases for free for our Guardian Plus clients.

Great post and useful input as always Kate thank you.

Just a quick question.. Getting settled quickly in who's favour?

[Kate Cottrell]

Reply to various points

Just to clear up a few points here as follows:

LLP - It is only the legal profession that is covered by this so anyone else including accountants and those involved in IR35 are not but it begs the question (in the context of IR35) why would you need it?

PPI claims handlers - without commenting on this particular case- in general those involved are being trained to do the work first and are subject to constant performance reviews. Although it may be arguable that this is a "project" it is the normal business of the client and is likely to go on for many years. The end clients remain wholly responsible for the work and compliance with numerous regulations regardless of the contractual chain. As always it is the reality of the working relationship that is paramount rather than an "IR35 Friendly" contract with a third party.

IR35 investigation cases - yes on the increase and in our experience they are being settled very quickly. We defend cases for free for our Guardian Plus clients.

IR35 Forum - The decision to keep IR35 was and remains the Governments. The Forum is tasked with improving the administration of IR35. All the new procedures are up for review over the summer.

Hope this helps

Kate Cottrell

[TheFaQQer]

Abolish it and a lot of these firms will have to find new business.

Since one of these companies is involved with the IR35 forum, I can't see it being abolished in a rush.

[Qdos Contractor]

Just on the enquiry numbers; another FOI request earlier this year revealed that they had jumped to 193 in the first half of the last tax year (y/e 2013). As far as I'm aware we haven't had a figure for the complete tax year, but it's obviously going to be a significant increase from the 23 in y/e 2011 and 59 in y/e 2012.

So it's far from abandoned. HMRC have just created a fourth specialist team solely tasked with IR35, so I'd expect the numbers to continue to rise.

Interestingly, the vast majority of new IR35 enquiries we've had from our insured clients are into those working in the public sector.