HMRC only complete 10 out of 94 contract reviews
In the wake of the recent IR35 forum, where HMRC and industry representatives congregated to discuss everyone’s favourite tax legislation, a wealth of interesting information arose.
As well as renewed promises of a good old fashioned tax crackdown, with a further team of IR35 experts being added, some remarkable statistics surfaced concerning HMRC’s very own contract review service.
Getting your contract reviewed is vital when working through a limited company, compliance being crucial in eluding the threat of IR35. What has become clear however, is that people are not trusting the taxman to carry out this service, with an underwhelmingtotal of 94 contracts being reviewed ‘in house’ during the year ended 5th April.
To make matters worse, responses from HMRC were given to only 89 of these, and in 79 cases the Revenue were unable to provide an opinion. Unsurprisingly, this was said to be because of the extent to which complete certainty was required, with HMRC stating that contractors did not wish to provide further information or permit the Revenue to contact the end client.
IR35 Expert
Speaking to Qdos IR35 expert Kate Hardy, it is clear that a lack of trust the underlying issue, with contractors being wary of allowing the taxman communication with the end client.
“The service seems to have been used very little which only goes to show that contractors do not trust using HMRC to review their contract, for fear of it resulting in a potential IR35 enquiry. This fear certainly doesn’t seem unfounded as in most contracts reviewed by HMRC in 2012/13 it was unable to provide an opinion because it hadn’t been able to approach the end client directly.”
Out of 94 contracts reviewed by HMRC, it seems that only 10 people received an opinion on their contract, leaving 79 in the lurch, and 5 perhaps forgotten about. This uncertainty begs the question as to what ‘service’ HMRC are actually providing.
“For contractors working in the public sector, the Treasury give the example of providing their end client with a HMRC contract review as the necessary assurance of their tax. With only a very small number of opinions being given it is difficult to see how this could work in practice.”
For some contractors, getting an opinion directly from HMRC on their IR35 status may seem like the most obvious route. However, they do need to be aware that it could put them at significant risk of a subsequent IR35 enquiry.
So what’s the consensus on HMRC’s contract review service? To be honest the answer is bleak. With hardly any contracts being sent in for the taxman’s approval, and no sign of an upwards trend, it seems clear that independent advisors are the ones gaining the trust of those who are IR35 aware.
Don’t just take our word for it however, have your say in the comments box provided.
HMRC have a very consistent track record of appalling “customer” service. Would you trust HMRC to keep your contract information secure? These are the people who mislaid the bank details of 2 million child benefit claimants. Most contractors will do a quick risk assessment and come to the conclusion that it is safer to go to a competent service provider who will not try and destroy your life, rather than risking the consequences of asking HMRC.
If HMRC really wanted to qualify this then they could produce a template contract which we could all use. Simples.
Trust them – absolutely not, never, no, not even by the smallest particle.
They can take my house, my cars, my money off me and put me in prison and I have to prove myself to avoid it.
Why is the issue of trust even being considered? Am I daft? No, I’m a contractor.
Get real.
The only thing that surprises me in this… is that anyone is surprised.
The early days of HMRC contract reviews produced an overwhelming preponderance of “caught” verdicts, even where it was clear that this was not the case. So why would anyone trust HMRC, with their remit to collect as much tax as possible?
Another nonsensical IR35 Forum idea. what a waste of space that is. They have foisted Business Entity Tests on the contract community (thanks to the PCG for that tripe), an unwanted HMRC contract review “service” which it was obvious that no-one in their right mind would ever use and even asked dumb questions like “should dividends be reported via RTI?”. Which HMRC then went off “to consider”.
Idiots, it’s a forum for vested interests to dream up new ways to make contractors need their darned services.
Please get rid of this forum.
I believe that the Business Entity Test leaves out other business activities that should be considered:
– What about holding professional indemnity insurance? We need it so that has got to be worth some points?
– What about a web site? That has been noted as a plus in some judgments?
– Who came up with the idea of £1200.00 in advertising? You can advertise/communicate on the web which can be very effective at minimal cost, so shouldn’t you be able to refer to your advertising practices and business contact traffic?
– What about having an accountant? We need one and surly that is worth a couple of points?
– What about letter headed paper and business cards?
– What about professional qualifications and membership to professional bodies? Surly this should be a valid pointer to a business entity?
I am sure there are other ideas but what I have listed is common sense and valid pointers.
Since HMRC fail to even take into account Mutuality of Obligation why should anyone believe that they could give an unbiased assessment of any contract.
They can have no credibility until they acknowledge MoM is an integral part of proving or disproving “being in business”.
Refer to news and comment yesterday over Google.
We need a simple tax system that is clear in understanding and application.
It needs to be applied equally to everyone in proportion to income/tax debt
Tax funds going offshore. This applies equally to earnings of foreigners in our country and work sent offshore as it does to the profits of any organisation. We have all the required IT skills in-country.
Cease waffling comments on the pros or cons of current system – a joke – it wastes all our time.