- Wednesday, 25 June 2014 08:09
- Written by Andy Vessey
New IR35 guidance released
HMRC have replaced their IR35 FAQ's with updated guidance. There is not a lot to get excited about, however, as much of it is regurgitated and will provide nothing new for the discerning contractor apart from a few notable exceptions.
Contract Review Service (CRS)
We all know of the IR35 CRS and its function but probably what is not so well known is what the process involves. Well now the guidance sets out what information the CRS require to provide an opinion on a contract, namely:
- copy of the actual contract, obviously.
- any other documentation relating to the working terms and conditions.
- written statements from the worker and the client about their views of the working terms and conditions with particular emphasis on what happens in practice.
- details of how the engagement was obtained and the recruitment procedure together with a copy of any adverts for the work in question.
- a description of the nature of the services to be performed together with any job or work specifications for the contract.
- copies of any tenders made by the intermediary.
- details of any additional contractual terms not included within the written contracts, whether oral, written or implied.
- details of how and who allocates the work and the role the worker plays in the client's organisation- ie does he or she work alone or as part of a team.
- other relevant information from the worker or intermediary - for example this might include:
(i) the number of engagements held during the year
(ii) the number of different engagers
(iii) expenditure on equipment necessary for the performance of the contract
Disagreeing with an opinion
Anyone using the CRS is not under obligation to accept a negative opinion and has two courses of action available to them. Firstly, they can simply ignore it in favour of other evidence that supports their own opinion that IR35 does not apply. Alternatively, a freelancer may challenge HMRC's opinion in an attempt to change the Revenue's mind.
Where a dispute about an opinion cannot be resolved quickly then, with the contractor’s consent, the papers will be passed to the local IR35 inspector to resolve. So what turned out to be an innocent request for an IR35 assessment can unwittingly turn into an IR35 enquiry, by another name! Furthermore, if the Inspector supports the original opinion then this can only be overturned by the contractor requesting that formal tax and NIC assessments be raised so an appeal can be lodged. That appeal could end up being heard in the Tax Tribunals. What a nightmare! Anyone still think the CRS is a good idea??
A number of issues are clarified by the guidance, in particular that the IR35 rules apply to non resident PSCs where the worker lives in the UK and works for a client in the UK. In this scenario the PSC is treated as having a place of business in the UK whether or not it actually does have one.
Right of substitution
HMRC state that they do not accept a right of substitution exists if the end client's permission must be obtained before sending a replacement worker. Really? There maybe a number of valid reasons why a contractor may wish or need to receive the final OK from their client before installing a substitute. That should not diminish a genuine right of substitution. HMRC's interpretation is always open to challenge and this should be one of those occasions.Comments