In IR35 enquiries where the quality of initial evidence is not to the satisfaction of HMRC or where the Revenue require clarification of facts and/or additional information, HMRC will often suggest a meeting with the contractor at an early stage of the investigation.
In certain circumstances HMRC can insist on a visit to business premises by using their statutory powers under Schedule 36 Finance Act 2008. Even where the business is run from home HMRC can still insist on visiting those parts of the house that are used for the business although a Revenue officer has no right to roam around the private areas of the property without the owners’ permission. Furthermore, with the necessary authority, HMRC can turn up unannounced and even charge penalties if they are denied admission to the business premises.
In the vast majority of IR35 enquiries however HMRC are unlikely to resort to using their powers in this manner. It will therefore be left to the contractor to decide whether or not they fancy getting up close and personal with the Revenue.
To some, the prospect of meeting the tax man may be a daunting one, but there really is nothing to fear, especially where the contractors’ advisor is going to be present too. This is because such meetings are conducted by two Revenue officers who are simply on a fact finding mission, who then report back to a Status Inspector. One officer will ask the questions, with the other officer simply taking notes.
The main advantage of agreeing to a meeting is that it does shorten the enquiry time. During the meeting HMRC have the opportunity to ask supplementary questions that may arise out of answers given by the contractor. Contrast this to an enquiry that is conducted solely by correspondence, where there will be a natural delay of at least 30 days each time where HMRC issue a letter setting out their supplementary questions and the freelancer responding. Then depending on those replies there may be further questions borne out of them serving only to lengthen the enquiry process and increase the stress levels of the contractor.
Having agreed to a meeting a venue needs to be decided upon. This can be at a location of the contractors choosing and somewhere they will feel comfortable. Unless there is a reason for a meeting to be held at the business premises then it may be better to opt for the contractor’s tax adviser or accountant’s office. It is advisable not to hold a meeting at HMRC’s offices because this is their own patch and a contractor is likely to feel more stressful.
Before any meeting ask the officer for a summary of the areas to be covered at the meeting. HMRC will not provide a list of the questions they are going to ask but at least you will get a flavour of what to expect and enable you to prepare accordingly.
Depending on the issues to be discussed, a meeting can take anything between 1 – 3 hours but a lot of ground will be covered during that time. For any questions that a contractor is unsure about or needs more time to consider their answer then they are perfectly entitled to defer the matter by promising a response sometime after the meeting has taken place. Do not guess at the answer. Far better to say “don’t know” rather than to create potential problems for yourself further down the line. The presence of an advisor to hold the contractors hand is highly recommended as they will be able to guide you through the whole meeting and protect you from being entrapped by leading questions.
Several weeks after the meeting you will be sent a copy of the notes of the meeting which provides the contractor with the opportunity to make any suggested amendments. HMRC will always ask the freelancer to sign and date the notes but they cannot demand this and I always advise my clients not to sign them.
Fronting up to the Revenue is not a titanic battle and will help bring matters to a swifter conclusion, so do not be deterred.