If you’re engaging contractors, you need to be ready for an IR35/off-payroll compliance check. HMRC is actively investigating medium and large businesses to ascertain whether off-payroll rules are being followed correctly.
The stakes are high. Getting it wrong could lead to significant tax liability, interest and penalties, and costly disruption. Here’s how to prepare and protect your business.
Why HMRC carries out IR35 checks
HMRC uses IR35/off-payroll compliance checks to confirm that your business is applying the off-payroll rules correctly. They’ll want to check you have a reliable and low-risk process for determining IR35 status.
These checks can be triggered by many factors, including whistleblowing, anomalies in tax returns, or risk-based selection based on HMRC’s vast network of information.
Being investigated doesn’t mean you’ve done something wrong - but it likely means you have come up on HMRC’s risk radar, and that your process will be scrutinised.
What HMRC expects to see
During an IR35 investigation, HMRC will ask for evidence of your compliance process. That includes copies of process documents, interviews with key people, evidence of training, and copies of contracts that you use, your dispute process, and how status decisions were reached.
HMRC also assesses what advice you may have taken or read, tools you’ve used, and how decisions were communicated and documented.
If there are gaps or inconsistencies, they may consider you more than low-risk, and then conduct a deeper dive, and potentially disagree with your outside IR35 assessments, and then issue you with a tax bill.
How to reduce risk and protect your business
The best approach to minimise issues is to take a proactive, well-designed approach to IR35 compliance.
A thorough IR35 audit is one of the most effective ways to reduce exposure. It helps spot issues early, align working practices with your status determinations, and prepare the documentation HMRC will expect to see.
IR35 training is also vital. Hiring managers, HR and compliance teams need to understand their responsibilities and know how to identify risk. IR35 is not a one-time task - it requires attention and a consistent process.
Get the right support during an IR35 check
You don’t have to deal with HMRC alone. IR35 Shield provides expert support at every stage of an IR35 compliance check.
We also manage all correspondence with HMRC on your behalf, helping you respond with confidence.
Our structured approach focuses on early resolution, reducing disruption and minimising the risk of challenge or liability.
If you’re looking for help preparing for an HMRC investigation, book a call with our team today to find out how IR35 Shield can help you meet your obligations and protect your business from avoidable tax risk.
