IR35: Reviewing Previous Years

Q. I work in the private sector and, along with other contractors, are preparing for the introduction of the same IR35 legislation in the public sector.

One question I have is that, if placed within IR35 legislation by the client, could HMRC review previous years of working? If they then identify a tax liability could I then request Corporation Tax refunds for those years as these payments would have been based on my original profits?

To the best of my knowledge, my current and previous working practices’ place me outside of IR35.

A. Potentially HMRC could review previous years’ with regard to IR35, however in our opinion this is not HMRC’s intention. HMRC are unlikely to have the resources to make enquiries into previous tax years for public sector contractors whose status is determined to fall inside of IR35 post April 2017.  In situations where IR35 is applied to earlier tax years, then it is likely that those accounting periods affected will give rise to a C.T overpayment (this assumes that there are sufficient profits liable to C.T). The overpaid C.T would be available for set off against the PAYE & NIC liability & therefore the PSC would make a net payment of PAYE/NIC.

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