Why is it important to remain IR35 compliant?

With Rishi Sunak now appointed as PM, and Jeremy Hunt as Chancellor, they will no doubt continue their program of spending cuts. As part of that, the Treasury will undoubtably be looking for ways to bring in more revenue. Since IR35 is reportedly worth £1.4 billion, it’s an ideal place for them to start clawing back funds.

Anyone who isn’t 100% compliant will be easy pickings when it comes to an investigation, so it’s vital that compliance is your byword.

How to stay compliant with IR35

The IR35 reforms have been in place in the private sector for more than 18 months – and much longer again in the public sector – so you should already have good IR35 processes in place that ensure your contract and working practices match your IR35 status.

The key thing right now is to stick to those processes, regardless of whether it is you or your end client who is responsible for determining your status, no matter who holds tax liability. Ensure that you have paper trails for every decision and plenty of evidence (particularly if you fall into the category of contractors still responsible for their own status determination).

Check your contract and review your own practices, especially if you’ are working outside IR35. You want your status to be irreproachable.

If you want evidence to support your status, or help clients make a supported decision, you can look into an IR35 status review such as the Kingsbridge IR35 Status Tool. This asks you a series of carefully worded questions – designed by Kingsbridge’s Head of Tax, Andy Vessey – to garner a full view of your contract and working practices.

This will give you an instant inside or outside IR35 status along with a comprehensive report detailing the strengths and weaknesses of your engagement. The beauty of this is that if, say, you are confidently outside IR35 but there is an area of your working practices that HMRC could use against you in an investigation, you can become aware of it and make strides to make those practices compliant.

A particular benefit of the Kingsbridge tool is that it’s hybrid, meaning that should your case be borderline, it will be passed to one of our in-house IR35 specialists to look into, giving you peace of mind that your engagement has been fully comprehended.

Doing this will not only give you evidence as to why you or your client have reached a particular decision on your IR35 status, but also help you to make your case as watertight as possible and make you a less likely target for HMRC.

Can I protect myself against IR35 investigation?

The best way to protect yourself against investigation is to make yourself as IR35 compliant as you can possibly be. However, if HMRC decides to look into you then there isn’t much you can do about it apart from fight your corner. It is this reason – however misguided – that many end clients opt for blanket determinations or forced inside IR35 working – to protect themselves from possible investigation.

However, there are other ways to protect yourself and others in your contractor supply chain. IR35 insurance, such as IR35 Protect will provide you with cover against taxes, interest and penalties as a result of an IR35 investigation. However, it also flexes to cover whoever holds the tax liability for any given engagement, whether that’s you, your end client, or your recruiter. This removes the risk associated with IR35 and makes you a much more attractive hire in the process.