Revenue says seeking a contract opinion won't trigger IR35 review

The Inland Revenue has updated its frequently asked questions page to include essential information for contractors about the selection processes used to investigate personal service companies.

The recently added questions and answers are listed below:

'55. Will the Revenue investigate me because I have sent in a contract for their opinion?

No. Cases are selected for compliance reviews using a number of criteria, but whether the company has approached the Revenue for an opinion on a contract is not one of them.

56. How does the Revenue select IR35 cases for investigation?

A case would not be selected for review simply because it is an 'IR35 case'. Cases for employer compliance review are generally selected through a risk assessment process. This takes into account how much tax and national insurance is potentially at stake and various factors that could indicate the level of employers' compliance with their responsibilities. A small number of cases are separately selected at random.

57. Why is the Special Compliance Office involved in IR35 cases?

It is an important part of the Revenue's work to ensure that the tax system operates as Parliament intends. Our Special Compliance Office therefore takes an interest in schemes that present themselves as means to evade or avoid tax. It is likely that schemes advertised to 'Avoid IR35' will consequently attract their attention, and may lead to an investigation.'

This last question addresses recent reports that the Revenue's Special Compliance Office is planning a swoop on umbrella companies and other tax avoidance schemes catering for solo contractors caught by IR35.

The news came after firms running umbrella schemes reported that they had received calls from an SCO office in Liverpool.

Some practitioners specialising in the contractor market have set up IR35 umbrella companies specifically to bring their clients within the PAYE system.

--

Richard Powell, UKTECH