Faced with an IR35 enquiry, many contractors feel that they can’t say no to any request from HMRC.
Our advice would be that there is a time and a place. HMRC are often keen to arrange a face-to-face meeting believing that the enquiry can be concluded more quickly. However, in our experience such a meeting is not always in the best interests of the contractor. It is not standard practice for HMRC to issue an agenda or list of questions in advance of a face-to-face meeting so inevitably the contractor is expected to answer questions on the spot. Furthermore, HMRC’s own notes of such meetings are not always an accurate nor complete record of what was said. And when the subject matter under review is complex, the minor details are all too important.
An alternative is to ask HMRC to put any queries in writing. This ensures that there is a full audit trail and offers the opportunity for the contractor to give considered responses – perhaps after consultation with their accountant. There is of course a duty on the contractor not to withhold any information reasonably requested by HMRC. Contractors should also be aware that HMRC can choose to use legislative powers and issue a Section 36 Notice to obtain information if a satisfactory response is not forthcoming. Failure to respond after 30 days from the date of issuance of a Section 36 Notice can result in an initial penalty of £300 followed by £60 per day until the information is provided.
Our recommendation is always to engage with HMRC when they get in contact, but to do so in writing. Remember that HMRC cannot compel you to attend a face-to-face meeting, so ask them to submit their questions to you in a letter which allows you the time to take advice from an expert in the field.