IR35 check shut down with perfect blueprint for compliance

One of the first IR35 checks following private sector reform proves that off-payroll rules are manageable

Qdos has successfully closed down an HMRC IR35 check for a client in a significant win demonstrating that IR35 compliance can be managed.

The check is one of the first that has been successfully shut down since the implementation of the off-payroll working rules in the private sector, in 2021.

Our client, who wishes to remain anonymous, is a global business that engages over 300 contractors, the majority of them outside of IR35. 

Running for 18 months, the check was closed due to the comprehensive evidence submitted to HMRC in response to its request for information.

The result proves that businesses engaging contractors, on any scale, can continue to safely and compliantly place contractors outside IR35. 

 

 

How the IR35 check unfolded

The check began in September 2021, when our client received a letter from HMRC. This Schedule of Information sought to establish how the businesses managed compliance under the off-payroll working rules, highlighting several areas of interest. 

Among these were the systems and processes the business used in carrying out IR35 status determinations, along with how many contractors were deemed inside or outside IR35. HMRC also wanted to establish how many contractors our client had engaged, directly and via agencies.

Fortunately, the business had engaged Qdos from the outset, utilising the award-winning Status Review service. As a result, our client was well prepared for HMRC’s check and insured against the check. 

This was a strong foundation to work from, allowing us to be proactive and supportive in dealing with the enquiry. 

Once our client notified us of HMRC’s request, we undertook a consultative approach, advising them on how to best structure their response to the query and the evidence to submit in support. We also offered constructive feedback throughout this process to ensure the response was exhaustive.

As a result, the business was able to draft and submit its formal response to HMRC’s enquiry within three months, in early December 2021. Following this, HMRC arranged a call with our client to discuss an enquiry in May 2022. Qdos attended this call and our experts were fully involved throughout, as part of the service provided by Status Review. The check was then formally closed twelve months later, in May this year. 

This was thanks to the evidence submitted in our client’s response. Proof that all IR35 assessments had been made compliantly (by one of Qdos’ IR35 specialists) alongside a clear audit trail and robust processes and systems, was essential to proving compliance.

This is an excellent result and provides what our CEO Seb Maley called “the perfect blueprint for ensuring IR35 compliance.”

“There has been so much concern surrounding the off-payroll working rules in recent years – to the point where businesses have forced contractors inside IR35 or stopped engaging them altogether for fear of falling foul of this complex legislation.”

“The successful closure of this IR35 check – where the majority of contractors were engaged outside IR35 – is proof that the off-payroll working rules can in fact be managed”, he said.

 

 

What does this mean for businesses?

Above all else, this provides evidence that businesses can continue to engage contractors outside of IR35. The off-payroll working rules are perfectly manageable. 

This case is an important reminder to risk-averse businesses that insisting all contractors operate on the payroll irrespective of their IR35 status is unnecessary.