Confirmation of Arrangements letter and IR35

The 'Confirmation of Arrangements' letter between the freelancer and the client has become a useful tool in any IR35 enquiries to support the freelancers' case. Kate Hardy of Qdos Consulting examines the role of the 'COA'.

Kate Hardy of Qdos Consulting writes:

When dealing with IR35 investigations, the Revenue will not accept a written contract at face value, but will seek to challenge that what is stated within the contract reflects the actual working practices, for example the way in which services are actually provided on a day-to-day basis. In addition to this the Revenue will also seek clarification from the third party, ie the end client.

As a matter of course it is Qdos' policy to request that all clients being investigated with regards to IR35, approach their end clients with a view to completing Confirmation of Arrangements documents, to confirm the actual working practices. This document covers the key tests for IR35, such as Right of Substitution, Control and Mutuality of Obligation.

The Confirmation of Arrangements has proved to be extremely useful evidence in the defence against IR35. In addition to confirming the working practices, if signed by the end client, this will also provide the Revenue with third party information and in our opinion, where such information is provided, there should be no requirement for the Revenue to make a direct approach to the end client themselves.

Not only should the provision of this information satisfy the Revenue that the contract does reflect the actual day-to-day working practices, but for insurance purposes such a document would also confirm to the underwriters that the prospects of success are likely to be good. Providing details of working practices, alongside the actual contract will also ensure that there is a clear understanding between the service provider and end client.

In many cases, the Confirmation of Arrangements document has enabled us to bring cases to a speedy and satisfactory conclusion. Unfortunately however, there have been cases where the Revenue have approached end clients without our permission. Although Qdos will continue to challenge the Revenue on this subject, it is always a good idea to discuss with your end client the implications of IR35 and to set out the terms and conditions of the contract and the working practices prior to the commencement of a contract and complete a Confirmation of Arrangements document, which reflects the terms of the contract.