What began as a seemingly innocuous inspection of business records and PAYE for a freelancer who provides consulting services relating to design, development and manufacturing in the automotive industry, quickly turned into a full-blown IR35 investigation. At a meeting with Inland Revenue compliance officers in May, the consultant and his accountant were asked a series of questions regarding working practices specifically relating to IR35.
The consultant, as a member of the PCG (Professional Contractors Group), was able to call Abbey Tax via its helpline to open a dialogue. A few days later, the consultant received a request to sign the recorded minutes of the meeting prior to the submission of a report to an IR35 status inspector. Abbey Tax agreed to process his claim and the case was assigned to Lawspeed, which undertook its own fact-finding exercise to verify key aspects of the various engagements undertaken by the consultant's company.
Lawspeed was able to establish a notable bank of evidence to demonstrate that consultant’s company operated as a genuine business. This included relevant insurance policies, website promotion, company minutes, photos of dedicated office space and details of investment in training.
It also found that the minutes did not accurately reflect the discussions in the meeting or the reality of the company's engagements, and advised the consultant not to sign them. Instead, it responded to the Revenue pointing out the inaccuracies and furnishing additional relevant information.
At the end of August, a letter was received from the Revenue stating that the company's engagements were not subject to the IR35 legislation. The factors cited included lack of control by the client, substitution rights, the ability to determine relevant hours and notify proposed periods of non-performance as a courtesy rather than applying for "holiday", as well as substantial investment in training.
Commenting on the decision, PCG chairman Simon Juden said, "I am naturally delighted to hear of yet another IR35 win for a PCG member, and very pleased for [the consultant] that his case was resolved so speedily. We know from the experience of those whose cases have lasted two or three years or more how incredibly stressful it can be."
"I am extremely pleased with the result," the consultant who faced the investigation stated. "Lawspeed's help was excellent in guiding us through which documents to send and the correct approach in dealing with the Revenue. We have enough worries running a small business, so having the backup of professional legal help lifted a great weight off our shoulders."
Included in the PCG membership fee, PEI covers all full members for professional fees relating to any tax investigation, including those on IR35, S660A, PAYE, VAT and aspect enquiries. The amount of cover on any one claim is £75,000. Members who have submitted their contracts to the Revenue for an opinion are not excluded - even those who have had their contracts "failed".
In addition to this all-important cover, many members who have been through the pain of drawn-out tax investigations have found the peer support from fellow members invaluable. To date, PCG's Affiliate members who handle tax investigations have between them closed 647 cases in favour of the freelancer, with just two cases being won by the Revenue.
Sep 23, 2004
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