What January's IR35 Forum means for freelancers
The IR35 Forum’s first meeting of 2013 took place on January 22ndbut it is unfortunate that some six months have elapsed since the previous IR35 Forum meeting in July 2012 for two reasons, writes Kate Cottrell, founder of IR35 advisory Bauer & Cottrell.
Firstly, there has been a lot going on that affects freelance contractors in the intervening period such as the publication and withdrawal of the proposed Controlling Persons legislation, the ‘Office Holder’ IR35 rule and perhaps, most important of all, the implementation of the assurance processes for those freelance contractors engaged in the public sector. Secondly we now seem to have ended up with 11 ‘action’ points, with two key action points from the last meeting still unresolved.
HMRC’s IR35 Investigation Processes
Prior to the meeting last month, I submitted a paper raising various issues including, among others, a plea to extend the 30-day response time for the initial IR35 investigation letter, a request for the use of email and some inconsistencies of approach and communications across the three new IR35 teams.
Positively, HMRC are taking up some of these, but it was not prepared to budge on the response timescale for freelancers in receipt of HMRC’s IR35 letter. It is early days for the new IR35 investigation cases and we only have some 230 thus far, but it is vital that freelance contractors act as soon as they receive one of the new letters.
Why having only 30 days to respond to HMRC’s IR35 investigation letter is a problem
- The clock starts when the letter is addressed but this then goes via a centralised postal system in Bootle so freelancers/contractors may not actually get the letter for 7-10 days
- HMRC may not have your correct address but as they have also sent the letter to your agent/accountant the clock continues to tick
- Although the investigation is limited to a 12-month period this often involves more than one contract, or several extensions and a lot of paperwork needs to be compiled together with your submission as to why you do not think IR35 applies to you.
- If you have IR35 insurance the whole thing needs to go via the insurance company and appointed advisors have to review everything to see if you have a reasonable chance of success before getting the go-ahead from the underwriters to represent you.
The clear message, then, is to act as soon as possible on receipt of the letter.
Engaged in the Public Sector?
Our firm has been heavily involved with those freelance contractors in the public sector to help with the provision of appropriate assurances. There is unfortunately currently a complete lack of consistency of approach to the assurance process across government departments and their agencies. It is a real pity that the IR35 Forum could not cover this important issue that is causing real and serious problems for many freelancers/contractors.
However HMRC were able to confirm (point 24 of the minutes) the true role of the HMRC Contract Review service in these cases. Freelance contractors should not hesitate to hold up this confirmation to their recruitment agency, or the public body, asking for an assurance to prove that they are being asked to provide information from HMRC that HMRC is unable to give.
Main messages from this IR35 Forum meeting
- There are lots of unresolved IR35 issues
- Do not ignore contact from HMRC about IR35
- Watch out for the final version of the legislation governing office-holders
- If you are engaged in the
public sector or there is public money at the end of your contractual
chain you will be asked to provide assurances – be aware that the
processes are currently a mess!