IR35 and HMRC

What is an IR35 compliance check?

Given the subjective nature of IR35, it is important for businesses to proactively manage IR35 compliance to minimise risk. An HMRC IR35 Compliance check can unfortunately be opened at any time regardless of your determinations. Avoid falling into the common trap of "unsafe determinations," making it easier for HMRC to conclude that more tax should be paid.

More detail

HM Revenue and Customs (HMRC) is responsible for enforcing compliance with the IR35 rules in the United Kingdom. As part of this enforcement, HMRC carries out compliance checks to determine whether businesses are complying with the rules, and whether they are correctly determining the IR35 status of contractors and making the appropriate deductions from their payments.

HMRC have more powers than the police, and once they issue a Reg 80 "ticket" saying the tax is due, it either has to be paid or the taxpayer has to appeal to a tax tribunal.

Given the subjective nature of IR35, it is prudent for firms to avoid falling into the common trap of "unsafe determinations, " making it easier for HMRC to conclude that more tax should be paid.

During a compliance check, HMRC may review a business's contracts, agreements, and other documentation related to its relationships with contractors. It may ask the business to provide additional information and answer hundreds of questions.

Suppose HMRC finds that the business is not in compliance with the IR35 rules. In that case, it may take enforcement action, including requiring the business to pay backdated taxes and National Insurance contributions and imposing penalties and interest.

It's essential for businesses to be proactive in managing their compliance with the IR35 rules and to take steps to reduce the risk of non-compliance, such as conducting regular assessments, seeking professional advice, and keeping detailed documentation of their relationships with contractors.

To protect your business in advance of an HMRC compliance check, our Tax Investigation Service offers an expert defence team to manage everything for you.

If you have already received a compliance check letter from HMRC, contact us as soon as you can for expert advice and guidance.

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