(Newswire.net — October 21, 2014) London, LONDON —
In the past, it has certainly been the case that contractors have not wanted to approach HMRC to get an opinion on the status of their business when it comes to IR35 – if only because they were sure that doing so would inevitably lead to their own personal IR35 enquiry! The question recently has been whether their latest guidance (http://www.hmrc.gov.uk/ir35/intermediaries-legislation-ir35.pdf) would be reassuring enough for contractors to change their views on the CRS. On the whole, the answer has been no. Seb Maley, who works for Odos Accounting doesn’t believe so:
“The section on the CRS in the new guidance begins earnestly enough. However, it is clear that a contractor who receives an ‘inside IR35’ verdict from HMRC will still be left in with a bit of a predicament”.
That’s because the new guidance includes a section that details what should happen if a contractor is not happy with the opinion offered by HMRC and which mentions the fact that the relevant papers will be handed over to an IR35 inspector in their area. And whilst this is merely an explanatory note as to the process, it is hardly one that would inspire confidence in contractors considering using the service. This is particularly the case when you read on and see that the guidance notes:
“If there’s sufficient evidence to support an opinion and you disagree with that opinion, you can ask for an appealable decision against which you have a right of appeal”.
And this is where the problem lies. As Seb Maley notes, this is the bit that will cause the most consternation among contractors:
“To get what HMRC call an ‘appealable decision’ they would have to issue a tax and NIC assessment. This is effectively what happens at the end of an IR35 enquiry, where the amounts owed are set out. To appeal against this you would need to go to a Tax Tribunal”.
And if a contractor has received an ‘inside IR35′ opinion, where do they stand? Sure, they could pay it no attention and continue running their business outside of IR35, but this would surely be a risky strategy to adopt. Suppose a contractor has ignored that inside IR35 opinion and then at a later date they are selected for an inquiry into their IR35 status I would be pretty difficult for them to act as if they had no idea there was an issue. Chances are they would end up on the wrong side of a large fine or penalty for ignoring that earlier advice.
In the end then, it is unlikely that contractors will suddenly decide to start using the CRS in light of all these doubts as to the risks involved. It might be that the whole service needs looking at again, particularly when it came under fire last year for only having given 10 opinions out in the whole year. Until contractors have faith in the uses and independence of the service it will continue to be a waste of time.