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IR35: Best Practice

In the case of IR35, it is certainly better to be proactive rather than reactive.

Most limited company contractors are susceptible to IR35, therefore it is essential to ensure that steps have been taken in preparation in the event of an investigation. This article will help ensure you are prepared should HMRC come knocking.


Confirmation of Arrangements (COA)

For each assignment you undertake, having a Confirmation of Arrangements document outlining the working relationship between yourself and the end client, with the client’s signature can be used as evidence in the event of an IR35 investigation. This is to establish that the contractor is independent and has entered into a “business to business relationship” with the end client. This has proved to be a success in the past

Business Entity Tests

The Business Entity Test was introduced by HMRC in 2012. If you score in the low risk category, and can provide sufficient evidence of this, then this could put an IR35 investigation to bed and providing things remain the same for the next three years, HMRC will leave you alone for this period of time.

Documentation Reviews

Although contract reviews cannot necessarily be used as evidence, it will be taken into consideration that you have acted honestly and taken steps to ensure that you are outside of IR35. The added bonus of having your contract reviewed by an IR35 expert is that they are up-to-date on IR35 case law and therefore can advise on how to improve the contract from an IR35 perspective.

Tax Enquiry Insurance

A HMRC investigation can take up a lot of time, money and can be extremely stressful. Therefore having a form of insurance to cover the costs of the investigation will save a lot of time, money and will help ease the levels of stress involved, as the conditions of such a policy usually involves an IR35 expert to represent you. Not only is the person representing you an expert on IR35, they also know the tactics involved in successfully defending you against HMRC.

 

By Shaun Greenwell

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