If you receive a letter which mentions IR35, you should immediately assume that you are in the early stages of an IR35 enquiry. Don’t panic though: with a bit of planning and advice you can quickly ensure you are in the best position possible.
You should seek advice from an IR35 expert and not respond to HMRC until you are confident that the information you provide is not only accurate, but also presents a strong argument that you are outside the legislation.
It is always a good idea to engage an expert to deal directly with HMRC on your behalf. A consultant who has actually handled IR35 enquiries in the past is worth its weight in gold as they will be well aware of HMRC’s tactics, which can often catch the uninitiated out.
Such an expert can be hired on an hourly rate if you do not have an insurance policy in place, but be aware that IR35 enquiries can be quite lengthy affairs so the costs can mount up. If you do have tax investigation insurance, either directly or via your accountant, you should notify the insurer immediately to ensure the claim is registered and the consultant can begin work. It is always a good idea to check your insurance policy wording to ensure you are complying with the insurer’s terms & conditions.
A strong, well-considered response to HMRC’s initial probing will result in a far easier ride in an investigation. HMRC may agree at the outset that you are indeed outside IR35, although the chances are that they will be inclined to dig a little deeper.
IR35 is based around historic case law and a good amount of interpretation. Getting HMRC to back down takes determination and knowledge, which is why expert help is strongly recommended.
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