Contractors investigated under IR35 to be asked for feedback

Wednesday 4 June 2014

Contractors who have found themselves subject to an IR35 investigation since last April could be asked for their feedback.

In a bid to get a greater understanding of how the new rule is working in practice, the subjects of the investigations will be included in a survey to gauge the performance of IR35. This is part of a wider survey that will inform a review of the policy, should HM Revenue and Customs receive approval for it distribution.

The tax body is waiting for the go-ahead to send questionnaires to all payers of the levy and their advisers - something that hasn't been allowed in the past.

At a meeting of the IR35 Forum, it was explained that as a result of the 256 enquiries launched last year, tax and National Insurance Contributions contributed £985,901 to the £1.1 million yield. This indicates that IR35 policies and policing is working, with almost £35,000 collected in fines.

However, resistance to the rule and teething problems means it is crucial that the government understands how it is affecting contractors in the real world.

The IR35 Forum also claims that figures relating to the policy should be released as part of a review into the rule.

Carl Henning, senior solicitor at Brookson Legal Services, said: "We welcome the news that the government will be looking at how IR35 and its investigations are working in practice. Hopefully this means that where problems have arisen in the past, they will be addressed by HMRC.

"The government introduced IR35 to eliminate the avoidance of tax and Class 1 National Insurance by Contractors and Freelancers who were treated as employees by the client and were not self-employed at all. It's an important piece of legislation that makes sure true independent contractors are separated from those who are disguised employees. The smoother and more robust we can make it's application, the better"

For those still confused by IR35, contractor accountants are available to provide guidance and ensure compliance.

New official directions are also available via seven guides. Each document focuses on a specific and distinct aspect of IR35 and is available online.

"By making the guides individual products, it also means that “IR35 experts” will be able to skip the Introductory Guide and go straight to the more complex information they want," the IR35 Forum explained.

HMRC Manuals will be hosted on a separate site to the guides, but will be linked to, as will IR35 legislation.

However, attendees of the Forum did raise concerns that the Employment Status Manual is too long and offputting for readers.

HMRC claims that they are aware of this and therefore provide links to individual sections of the manual.

The tax body agreed with the IR35 Forum that it would be "a good idea" to link relevant parts of the manual to legislation, rather than the ITEPA as a whole.

It was also pointed out that because the 2006 Companies Act no longer requires businesses to have a company secretary, it should be removed as an example of an office holder from official guidance.

By Victoria McDonnell

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