Contractors shun Revenue contract opinions

The majority of contractors will not submit their contracts to the Inland Revenue, preferring to have them independently analysed by specialist advisors or not at all, according to a UKTECH poll.

The findings from the July poll showed only 10 per cent of contractors would ask the Revenue for an employment status opinion regarding their contracts. The remaining 90 per cent would either prefer to take contracts to an independent specialist or bypass seeking an opinion altogether.

Almost a third of contractors who took part in the poll said they would not submit their current contract to the Revenue or a specialist because they were 'certain it was outside of IR35.'

Contractors do not trust the Revenue (figures in %)

Twenty-seven per cent sought to attain clarity over whether their contract was 'in' or 'out' from an independent specialist and 60 per cent stated they would not submit their contract at all.

Of the 60 per cent of those who would 'wait and see', half said they were confident they were outside of IR35.

Twelve per cent were holding tight to their contracts, believing they were IR35-caught, and a further 21 per cent would not submit their contract to anyone for 'other reasons.'

Kevin Miller, IR35 expert, said: "In order to avoid possible penalties under IR35 contractors need to demonstrate they took 'reasonable steps' to assess their status under IR35. The Revenue confirmed in meetings with the PCG that it was not necessary for contractors to submit their contracts to the Revenue for an opinion in order to demonstrate that they had taken reasonable steps. Neither is it necessary to use an independent expert, although many contractors seek the comfort of an expert opinion.

"Contractors are entitled to form their own opinion on their status, but it must be an informed opinion and not one based on ignorance or disregard of the regulations and the main issues. Members of PCG have access to a great deal of advice and assistance from experts and other members to help them judge their own situation. Contractors who are not members or who do not take the time and effort to research the issues elsewhere are at risk of either paying more tax than they need to or of incurring penalties if they have ignored the legislation."

The Revenue announced it would provide contractors who, having read its guidance information, were still uncertain about their status with a contract review service in February 2000.

The review service invited contractors to send their contracts by post or email and pledged to provide an opinion within 28 days.

The Inland Revenue declined to comment on the survey findings.