IR35 Investigations - understanding, defending

IR35 Investigations: Next >>

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Introduction:

Businesses are not selected at random for investigation. Most cases are selected by well trained Inspectors at HM Revenue & Customs (HMRC). The Inspectors will choose investigation cases for specific reasons.

It may be that HMRC have found mistakes in a number of companies of a particular sector thereby prompting them to enquire into some more companies in the same sector. Other things that may cause an investigation are anonymous tip-off's, the late submission of the employer's annual return and other information held on the tax records. In addition to this, HMRC maintain detailed databases and the Inspectors will use statistics from these to spot companies and contractors that appear significantly different to the norm.

What to do if you are selected for investigation:

You should immediately enlist the services of a professional advisor - but not just any professional advisor. Make sure you select one who specialises in defending IR35 investigations. Many professional advisors provide on-going accounting and tax services to contractors, but not all of them are experienced specialists in defending IR35 investigations. If you are not represented by an excellent advisor, the HMRC Inspector will most certainly capitalise on this.

Requests for meetings:

If you are selected for investigation, the HMRC Inspector is likely to ask you to attend a meeting to "interview" you. This is common practice in all HMRC investigations, not just IR35 enquiries. Most leading IR35 investigation specialists would advise that you should NOT under any circumstances attend such a meeting. You should be aware that HMRC do not have a legal right to insist on your attendance at such a meeting.

Most specialist advisors advise against attending meetings because the Inspector's questions can often be leading and an innocent contractor who is genuinely self employed may unwittingly incriminate himself. There may be circumstances when a meeting will be beneficial but most IR35 specialists would suggest these circumstances are rare. If you have enlisted the services of a really good specialist they will tell you if they believe a meeting to be in your interests.

Your Contract:

The contract your company has with your customer will not be the only factor in the investigation, but it will be a very important one. If you read our sections on "Your Contract" and "How to beat IR35" you will begin to understand the importance of the contract content and wording.

However, increasingly HMRC Inspector's are paying slightly less attention to the written contract and are investigating more deeply than before the general working conditions and arrangements under which the contractor provides his service. Here lies a danger to which all contractors should be wise - the danger that the Inspector may speak to the contractor's customer without the contractor even knowing (see next page).

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Full index of pages:

Home Page IR35 Background - page 1 IR35 Background - page 2 IR35 Background - page 3

IR35 Rules - page 1 IR35 Rules - page 2 Beat IR35 - page 1 Beat IR35 - page 2

Beat IR35 - page 3 Beat IR35 - page 4 Ltd Company - page 1 Ltd Company - page 2

Ltd Company - page 3 Ltd Company - page 4 Umbrella Companies - page 1

Umbrella Companies - page 2 Composite Companies - page 1 Composite Companies - page 2

Composite Co - page 3 Composite Co - page 4 MSC - page 1 MSC - page 2 IR35 Insurance

IR35 Investigations - page 1 IR35 Investigations - page 2 Contracts - page 1

Contracts - page 2 Contracts - page 3 Resources 1 Resources 2 Resources 2 Sitemap