Contractors | HMRC drops IR35 enquiry carrying over £100,000 tax liability

HMRC drops IR35 enquiry carrying over £100,000 tax liability

IR35 advisory firm Qdos has successfully shut down HMRC following a year-long IR35 enquiry where the tax liabilities for the company under investigation could have exceeded £100,000.

The anonymous company has two directors, both of whom are contractors. It was initially notified of a Corporation Tax enquiry in 2017, but then was then told in January 2018 that HMRC would be carrying out an IR35 enquiry into two recent contracts - one of which was provided directly and one through an agency.

After more than 12 months of correspondence, Qdos was notified by HMRC earlier this week that the IR35 enquiry was closed.

Qdos CEO, Seb Maley, said that the length of time it took to come to a decision was worrying. “It is of real concern that despite substitution having been exercised multiple times - and HMRC being aware of that at the outset - it took so long for them to accept that IR35 didn’t apply,” he said.

“This is the second IR35 case Qdos has successfully defended already this year, which is reflective of HMRC’s desire to attack contracts that on closer inspection clearly belong outside the rules.

“We’re also left to wonder how and why HMRC jumped from a Corporation Tax enquiry to an IR35 enquiry.

"It could be coincidence, but it does make you question whether this is a deliberate move and if there is information sharing between departments.”

However, Maley added that he was delighted to have successfully shut down this IR35 enquiry and to have saved these contractors what could have amounted to more than £100,000 in tax liabilities. “Without tax enquiry insurance, this would have been costly to the contractors involved before the potential cost of unpaid tax, interest and penalties are even considered,” he said.

“With private sector reform on the horizon, it bodes well that both end-clients were supportive of an outside IR35 status. This evidence was pivotal and shows the value of joined-up thinking when making decisions.”

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