Contractors' Questions: Should I get a second IR35 opinion?

Contractor’s Question: Help; I’m being investigated for IR35 and have been for three years. It has been concluded by HMRC that I am caught, but I’m yet to accept their assessment. Would a second opinion be worthwhile, or should I just accept HMRC’s decision that I’m inside the legislation, regardless of the consequences for me and my PSC?

Expert’s Answer: I would definitely recommend seeking a second opinion on the ruling -- there are specialists who can help you with this. HMRC is known to get it wrong with their determinations and they’ve lost a large number of cases that have been taken to tribunal.

Primary Path Ltd v HMRC is a prime example. The investigation spanned a very lengthy seven years, causing considerable stress to the business and its director personally. When it eventually got to tribunal, it was found that none of the main IR35 tests were satisfied and that the engagement was clearly not one of employment. HMRC had completely misread the case. They spent years pursuing a cause which was easily dismissed at tribunal.

The Primary Path case highlights the complexity of IR35. It causes a huge headache for businesses that want nothing more than to be compliant -- but it also causes a headache for HMRC which have to prove that it applies. For this reason, I would be minded to challenge the determination, at least until you are advised not to by an independent expert 

It’s important to remember that you can incur costs when challenging HMRC’s existing ruling and these can be significant if you are unsuccessful. If you’re an IPSE member, we’ll pay for expert advice on this.

Another option, and one with no cost implications, is the new Employment Status Service (ESS)e which was launched by HMRC earlier this month. You can access it here. It's completely anonymous -- there will be no record that you've used it. At the end of using the tool, you have an option to download and print the outcome, along with the questions and the answers you gave.

If the tool determines IR35 does not apply to your engagement, show the results to HMRC. If they agree that the information inputted is accurate, they should close the investigation.

If the ESS determines IR35 does apply, do not give up there. There is still concern that the ESS is not always accurate, so it will still be worth getting that second opinion from an independent source.

The expert was Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).