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HMRC close £100,000 IR35 enquiry
by Susie Hughes at 11:40 13/02/19 (News on IR35)
HMRC has closed a year-long IR35 enquiry where the tax liabilities for the company under investigation could have exceeded £100,000.
The company, that asked to remain anonymous, has two Directors, both of whom are contractors, and was initially notified of a Corporation Tax enquiry in 2017. It was then told in January 2018 that HMRC would be carrying out an IR35 enquiry into two recent contracts - one of which was provided directly and one through an agency. The company were represented by IR35 advisors, Qdos, through its insurance policy.

After more than 12 months of correspondence Qdos was notified by HMRC earlier this week that the IR35 enquiry was closed. One of the contractors represented by Qdos said: “I unequivocally recommend Qdos' services. They are consistently responsive and effective - particularly so in an IR35 investigation which was closed down at no cost to our company.”

Key points from the enquiry:

  • The enquiry started into an unrelated matter but eventually focused on IR35
  • The right of substitution was exercised in reality
  • It was clear the individuals did not work under the control of their clients
  • Both end-clients were supportive of outside IR35 status
  • HMRC did not specifically disclose why they closed the enquiry
  • The company had insurance with Qdos, so all costs were covered.

Qdos CEO, Seb Maley, said: “We’re delighted to have successfully shut down this IR35 enquiry and to have saved these contractors what could have amounted to more than £100,000 in tax liabilities. Without tax enquiry insurance, this would have been costly to the contractors involved before the potential cost of unpaid tax, interest and penalties are even considered.

“It is of real concern that despite substitution having been exercised multiple times - and HMRC being aware of that at the outset - it took so long for them to accept that IR35 didn’t apply. This is the second IR35 case Qdos has successfully defended already this year, which is reflective of HMRC’s desire to attack contracts that on closer inspection clearly belong outside the rules.

“We’re also left to wonder how and why HMRC jumped from a Corporation Tax enquiry to an IR35 enquiry. It could be coincidence, but it does make you question whether this is a deliberate move and if there is information sharing between departments.

“With private sector reform on the horizon, it bodes well that both end-clients were supportive of an outside IR35 status. This evidence was pivotal and shows the value of joined-up thinking when making decisions.”

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Susie Hughes © Shout99 2019

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