Contractors' Questions: Is confirming arrangements worth it for IR35?

Contractor’s Question: In light of this article about Confirmation of Arrangements, is it worth drawing up a CoA document for defending against IR35, and if they are still helpful, how?

Expert’s Answer: HM Revenue & Customs has never accepted a CoA document at face value and quite rightly still checks and establish their own facts. So a CoA document by itself has never been some kind of magic bullet. 

However, they are very useful to contractors, as a matter of due diligence whether under IR35 investigation or not. If HMRC investigate the IR35 status a few years down the line then the contractor is already armed with the views of the person they reported to, and if the case was to proceed to a Tax Tribunal or Court, this person would be called as a witness to give evidence on the basis of the contents of the CoA. 

When under investigation it is always wise to get these views, as soon as possible and it is also useful, as it ensures that HMRC will know who is the right person to comment on the day-to-day working arrangements. If the contractor does not identify a particular person then HMRC will start with the HR department, whose personnel often has little idea of the work the contractor did. In fact, we have seen cases where HR did not even know the contractor!

In summary, CoA are extremely useful but they have never stopped an investigation in its tracks until HMRC have confirmed the facts for themselves. It is true that IR35 investigations are taking longer, but I am pleased to report that last week I had a case closed in just over one month after submitting a robust technical argument and highlighting that the contractor fell clearly into the ‘low risk’ bracket. Hopefully, the tide is turning so that HMRC will NOT seek every tiny piece of information and return to constant evaluation of the risk profiles throughout the investigation process.

The expert was Kate Cottrell, co-founder of employment status firm Bauer & Cottrell.

Wednesday 20th May 2015