Introduction
Challenges by HMRC for IR35 status are normally triggered from
self assessment enquiries or business reviews. Avoiding these reviews is
of vital importance.
This article discusses some actions you can take to minimise the risk of
investigation.
Why you want to avoid an investigation
The employment status of workers can be difficult to reach a satisfactory
conclusion.
Even when comparing judgements on similar cases some aspects are given more
weight than others. It is not a case of ticking boxes to decide on the status
of workers, but instead to consider “the whole picture”.
When dealing with a Self Assessment Enquiry or a Business review you will be
“fighting against” experienced Revenue officials who will either be auditors or
Tax Inspectors.
Whilst the Revenue has lost some tax cases over the last few years, you do not
get to see all the ones the Revenue win!
Whilst working for the Revenue, ex inspector Ray McMahon, obtained results in
over 80% of all reviews. The Revenue expects to win most arguments and few ever
go before the Commissioners or the Courts. Of those that do only a few of these
are lost by the Revenue.
Tax investigations can be very stressful and time consuming and also cost you lots of money.
Tax investigations can be very stressful and time consuming and also cost you lots of money, considerably so
if the Revenue decide you are in fact “a disguised employee”.
To find out how much being caught by IR35 will cost you use the IR35 Tax Calculator.
Practices to avoid an investigation
-
Ensure all tax documents are completed accurately and do not have mistakes on
them with crossings out and a lot of correction fluid;
-
Ensure that all tax demands are paid on time with all payments being sent to
the correct office or processing centre;
-
Take professional advice before you sign any Contract from either an agency or
a client;
-
The contract should make it clear from the clauses and conditions that you are
an independent contractor not an employee;
-
Make sure all expenses are categorised correctly on any Self Assessment (SA)
return;
-
If there are any significant changes to any expenses on the SA return, include
a note in “additional notes” as this can make it clear to the Revenue there is
a perfectly good explanation for these changes; and
-
If you have ever been instructed by the Revenue to make changes to your
records, make sure these are done. If they’re not, then you will be listed for
another review in only a couple of years.
Next steps
Seek professional advice if you have an investigation pending, and also if you
feel that you may have made mistakes in the past that need rectifying for the
future.
Published: Wednesday, October 11, 2006
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