Contractual: Investigations Arising Through IR 35

The number of IR35 investigations HMRC undertook in 2012 has been superseded by the number they’ve carried out in 2013 and probably does not reflect the number they plan to carry out in 2014. HMRC are putting special focus on stopping disguised employment and eager to make sure that their targets are met to increase the number of investigations in this regard. DNS has experienced the increase in HMRC’s IR35 “disguised employment” investigations which allows government to scrutinise the contracts, submitted tax returns or business accounts of freelancers and contractors on the grounds that they may be using “personal service companies” while actually working as “disguised employees”. The legislation, which is designed to prevent freelancers paying lower tax rates and national insurance on earnings, allows HMRC to make contractors prove they are not disguised employees of their clients.

How will DNS help me?

DNS can review all of your contracts and we urge you to take our IR 35 business entity test today, which is free via our website. To react to this type of investigation, DNS review your contract, pinpointing the areas where it may have let you down. We then help you to collate the evidence to prove you are not a disguised employee, the accounts, client files, data in relation to your working practices, evidence to prove that you are running a business and so on. We will ensure you are represented by a legal professional should the case come to that.

Case history: HMRC suspected Adam of disguised employment even though he could show supporting evidence that he had a good portfolio of clients, a website, letterhead and a travel history to support his claim. The case went all the way to Tribunal. Adam won. The fees involved amounted to little short of £7,000. Adam’s DNS Tax Investigation cover protected him against high fees.