Tax Bulletin 71: Latest on Revenue's approach to clients
As an extremely busy Senior Tax Manager with Qdos Consulting Ltd concentrating on the challenge of dealing with the Inland Revenue on behalf of contractors, it always takes me a long time to acquire information that may be hidden in the depths of IR notices and bulletins that are within the public domain that could be used to support our arguments.
So following on from Keith Preece's splendid article titled IR35: Revenue approaches to end clients dated 22 July 2004 (171 comments to date) I show below an extract from the Inland Revenue's Tax Bulletin 71 published on the Revenue's website 21 June 2004.
Alignment of Officers' Information Powers
Inland Revenue powers to investigate National Insurance cases are contained in section 110ZA of the Social Security Administration Act 1992. These powers are considerably wider than those for tax and include a power to enter premises and examine (interview) persons on those premises as well as a power to compel the production of documents and information. We are now correcting this misalignment by removing the power of entry and examination and applying the section 20 TMA information powers to National Insurance.
This will allow the Inland Revenue to ask both primary and secondary contributors to provide documents and information about their liability for National Insurance. The Inland Revenue can also ask third parties to provide documents, which are relevant to the contributions liability of another, but these requests must be made under a formal notice, which needs the consent of a Tax Appeal Commissioner before it can be issued.
At the same time we are also introducing a regulation making power which will allow us to introduce powers to inspect SSP and SMP records on the same basis as we can currently inspect PAYE records.
Revenue's website says simply 'Tax Bulletin 71 has been published today'. A simple article contents list may have highlighted this statement for all interested parties including the rogue Status Inspectors that are acting beyond the legislation in gathering 'evidence'.
Questions of end client
I must emphasise Keith's statement that the Revenue do not have statutory powers to ask questions of third parties - they may obtain documents under Section 20 (3) TMA 1970 but the request must be made under a formal notice which needs a signature of a General or Special Commissioner.
Of course, the Inspector will say 'I do not have sufficient information which would allow me to issue a formal ruling in this case and I would certainly never commit the Inland Revenue to any decision based on anything other than all the facts.'
I've known Inspectors to ask more than 35 questions of the end client and even gone back for more when the answers given have not matched their expectations. The cases are dragged-out, some for more than two years, by Inspectors trying to gather all the 'facts'.
Even complaining to Area Directors concerning the length of time it is taking to issue a formal opinion gets referred back to the Inspector, who says to resolve this is to have a meeting with the end client.
Secret meetings
Of course, neither the contractor nor his representative is invited to this meeting. Summary notes of these secret meetings are produced but never a list of questions asked or the answers given.
The result is that the case goes on and on and the unfortunate contractor becomes more and more frustrated and stressed feeling that there is a 'Sword of Damocles' hanging by a horse hair over his head. I trust that the 'Spear and Shield of Theus' type services and products Qdos offers contractors alleviate these feelings and brings about the correct result at the end of the day.
Denis J. Mansbridge
Senior Tax Manager
Qdos Consulting - for freelancers