You may now need IR35 proof hatyou are not caught by it.
It is a new phenomenon and it is very clever.
HMRC used to initiate investigations on contractors as their main tactic.
They won some cases but they lost the vast majority of them.
It was a bit scattergun.
They had to decide themselves whom to investigate.
Now, they have changed tack and are getting contractors to investigate themselves.
There are two ways they are doing this.
Public Sector Contractors
Firstly, for IT Contractors who want to work in the public sector they are going to make the contractors prove they are outside IR35 before letting them work there.
How are they going to do that?
As part of the IR35 panel, the Professional Contractors Group devised IR35 Business Entity Tests. These, purportedly, show whether contractors were at High, Medium or Low risk of being inside IR35.
HMRC said ‘thank you very much‘ for the IR35 Test. They then put their own markings or weighting factors on the different tests.
This is not definitive though.
This is only their own interpretation of the IR35 law though.
IT Contractors Test
However, the test shows that most IT Contractors are at High or Medium risk of being inside IR35.
So, what they are doing now is forcing contractors to take that test. That’s to prove that they are at low risk of being caught by IR35.
Unfortunately, it shows most contractors as being at High or Medium risk of being caught by IR35.
Unless they can take steps to become low risk that means the contractor can‘t get the contract. Either that or would have to become a permanent member of staff.
Thousands of Letters
The second way that HMRC are forcing contractors to finger themselves is that they have decided to send out thousands of letters to contractors.
They ask the contractors to do the online IR35 test.
They then ask them to either own up or to prove that they are at Low Risk of being inside IR35.
If the contractor doesn‘t reply within a month that will trigger a home visit by one of the new IR35 Compliance teams. They have been set up in Edinburgh, Salford and Croydon.
You have to give it to them.
This is a pretty smart way of doing things.
Maybe the police should do it too.
Maybe the police should send out thousands of letters to people asking them to prove they have not committed any crimes in the past year.
The recipients could do this by sending their tax returns and by testing their fingerprints online with a database of fingerprints of people suspected of crimes. Or they could do it by matching their DNA online with that of people wanted for crimes.
By providing this proof to the police they could eliminate themselves from all police enquiries. As a result, they wouldn‘t be investigated for another three years.
However, if they didn‘t reply with proof within a month this may precipitate a visit from the police and an investigation.
That would be a good way for the police to be able to eliminate some people from their investigations. That’s so that they could concentrate on the ones that are left.
You need to have an IR35 proof way of working.
This is way the UK seems to be going at the moment.
It‘s not Big Brother that is watching you.
It is you who are being asked to watch yourself.
Would you qualify to work in the public sector?
If you got one of the letters would you be able to prove, within a month, that you are at Low Risk of being inside IR35?
Take the IR35 Test here.
How did you do?