HMRC deploys a fourth IR35 specialist team
A new crack unit of Revenue & Customs officers dedicated to investigating contractors under IR35 is being deployed, taking the number of compliance teams specialising in the legislation from three to four.
At the last IR35 Forum meeting on April 29th, HM Revenue & Customs updated the aim of its specialist teams – based in Croydon, Manchester and Edinburgh, and said they would be joined by a new team in Bradford.
Ultimately, said HMRC, its aim is to see the four specialist teams’ approach working well enough to be “normalised,” so that IR35 could be investigated as not the main or only risk by non-specialist tax officers, with advice as necessary from the specialists.
The increase in the taxman’s resources to deal with IR35, which forum members appeared to support by saying they would be “disappointed” if IR35 was removed from the dedicated units, was last night linked to supply and demand.
Kate Cottrell, the only IR35 specialist to attend the forum’s April meeting, told ContractorUK: “HMRC has increased the number of IR35 specialist teams to four, so it would be fair to say that they are needed to deal with the increase in investigations.”
As to the precise number of investigations - and other “IR35 statistics” - the Revenue was asked at the meeting to provide them but declined, saying it intends to publish such data on a set timetable basis “in the future.”
However calculations by Qdos Consulting, an employment status adviser, suggest that the number of IR35 investigations could in future exceed 1,000 per tax year, given that it previously forecast that “up to” 1,000 cases could be managed by the three teams alone.
Addressing the capacity of the teams, HMRC conceded to the forum that there was a “finite amount” of work they could handle partly, it seems, because its non-specialist tax officers have been asked to “channel cases involving IR35 to the specialist teams”.
In line with the implied upturn in IR35 investigations, the forum heard that customer enquiries into HMRC’s Contract Review service have “increased significantly,” although the Revenue pointed out that some could involve a taxpayer merely asking what IR35 is.
Turning to the number of contracts submitted for the service, the department revealed that of the 94 it had reviewed, it was able to give a response in 89 of them but, of those, in 79 it was “unable to give an opinion” for IR35 purposes.
HMRC explained: “The reasons for the high number of ‘unable to give an opinion’ outcomes was the extent to which complete certainty was required and the caller was reluctant to provide further information or allow the service to go to the end-user client.
“HMRC would like to consider a change in procedure to lower the number of cases where it is not possible to give an opinion. It could, for instance, give an opinion based on statements given by the caller without going to the end client. The team will review their procedures, revisit guidance and report back to the forum”.
But the Contract Review Service may also be too slow, especially for some commercial contractors working in the public sector who are being asked to provide assurance that they are outside IR35, the forum heard.
As a result, HMRC said its review service would “give weight to” but could not regard as definitive opinions from external, IR35 contract review specialists, and was told that allowing such private sector readings to be accepted as evidence by the public sector could help.
The Revenue added that its Contract Review service would be evaluated in the summer, alongside the piloted IR35 Business Entity Tests and the new IR35 compliance approach it introduced in May last year.