New IR35 case stopped in its tracks by Taxpayers Charter

A status advisory to contractors has closed down an IR35 case before it even got off the ground by using HMRC’s own charter for taxpayers against it.

Qdos says the Revenue’s enquiry began in the traditional way -- an employer compliance review, but once the contractor handled the review, it began to take a less conventional turn.

In fact, once the PSC had been asked by HMRC ‘if IR35 has been considered’ (official code for launching an IR35 probe), and a defence by the advisory on the contractors’ behalf was submitted, silence ensued.

Eight weeks of no communication from the Revenue finally ended, according to Qdos manager Kate Cox, when a letter from the department’s IR35 Technical team arrived.

'Should they wish'

But far from being an official decision, the HMRC letter merely confirmed that the team had received the case, and further stated that they may make further enquiries “should they wish.”

“Effectively therefore, HMRC were holding the case open indefinitely,” says Cox. “It was at [our] advice to challenge [this as] the client wasn’t happy with HMRC’s stance”.

As to the basis for the challenge, she used the Taxpayer’s Charter which says that HMRC, in this case nearly three months undecided, must “provide a helpful, efficient and effective service.”

'Quickly'

The charterer from HMRC further vows to taxpayers: “We’ll help you understand what you have to do and when you have to do it.

“We’ll deal with the information you give us quickly, efficiently, and keep any costs to you at a minimum. We’ll put any mistakes right as soon as we can.”

In a letter of objection to HMRC, which cited the Taxpayer’s Charter, Qdos said it was not “fair practice” to hold the enquiry open indefinitely, as the IR35 officials had signalled.

'Too busy to respond'

“[The contractor] wanted to know if this is normal procedure -- which in my experience it is not,” says Cox.

“I think they tried to take this course of action because they were simply too busy to respond. It’s less a tactic, and more just an official-sounding way of saying ‘we’re a bit busy and we’ll get back to you when we can.’”

'Unclear'

The letter of objection, which also restated why the PSC was outside IR35, did the trick. The Revenue responded to it promptly, saying it did not intend to purse the matter any further.

To Cox, it was the main but not the only odd aspect of the IR35 investigation. “[This was an] unusual case, in that HMRC did not ask any questions surrounding IR35, nor make any actual enquiries regarding the application of IR35 to our client’s working arrangements with its end clients,” she said. “It is unclear whether HMRC even reviewed the contractual terms they had specifically requested.”