Kate Cottrell of freelance tax specialists Bauer & Cottrell has just completed its first IR35 investigation case under the new administration processes - taking three weeks from sending in the technical submission to receiving the all clear.
Kate was one of the first advisers to the Office of Tax Simplification (OTS) and has been involved throughout the establishment and operation of the IR35 Forum. Kate is also a regular contributor to the forums on Shout99 and a member of our panel of experts.
Here Kate explains how it happened:
HMRC first wrote to our client on June 21 2012. Our client was covered for this investigation under his legal expenses policy, for which we are the authorised representative. Although this is a new approach by HMRC, our basic processes remain the same as for the last 10 years as follows:
- We reviewed all contracts and established full details of the working practices.
- We pulled together any factors or features in support of operating as a genuine business.
- We covered in detail the experience, expertise and qualifications of the individual and highlighted areas of specialism.
- We reviewed the case against up to date case law precedent.
- We prepared carefully for any follow on client/agency/end client contact from HMRC.
We also tested other parts of HMRC’s new approach to IR35 compliance and asked our client to take the HMRC Business Entity Tests and compared his case to the new HMRC IR35 Scenarios. The results were useful and we used them in our technical submission.
We provided a detailed technical submission together with the requested financial information to HMRC on July 17 2012 and received the all clear on August 8 2012. HMRC has undertaken not to check again for the next three years provided that the information given is accurate and the 'circumstances – and in particular, your client’s working arrangements – do not change in that time'.
This does not mean that our client can forget about IR35 for three years, as the IR35 legislation has not changed but it is a significant change in approach by HMRC.
Our client had a strong case with multiple concurrent contracts with some work being undertaken from his home office. He has been contracting since before IR35 was introduced. Like us he is delighted with the result and how quickly this was resolved.
Bauer & Cottrell
The new HMRC IR35 compliance letters, where the individual is asked if they have considered IR35 and whether or not it applies, was suggested to HMRC by Kate. She said: "This first experience of the new process is very refreshing and shows enormous potential to solve the serious past problems of IR35 investigations lasting for several years.
"It also demonstrates transparency so that everyone knows at the outset that this is all about IR35 rather than past cases, which were targeted for IR35 but veiled within an HMRC Employer Compliance Review or other HMRC enquiry”.
For general coverage of IR35 policy and cases, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2012