Another contractor wins IR35 case

IT contractor Elaine Richardson, trading as ECR Consulting, emerged victorious last week from an IR35 case that could have cost her £50,000.

In their ruling, the tribunal judges concluded, “It is clear to us that ECR is a genuine business and therefore not a target of the IR35 legislation.”

After it decided Richardson was a disguised employee through an engagement with Vertex Data Science, HMRC handed her a £50,000 tax assessment in November 2005. As a member of the Professional Contractors Group (PCG), she was covered by tax investigation insurance and was represented by Accountax Consulting.

The tribunal applied three status tests - mutuality of obligation, substitution and control - to determine the nature of her working relationship with Vertex and concluded: “ECR operates from a dedicated business area at her home. It has a company domain and website. ECR advertises its services and is a member of the PCG. It has retained reserves and invested in development and has over the years taken on fixed price work for a variety of clients.”

Accountax Consulting’s Matt Boddington, who represented ECR Consulting at the tribunal, commented: “What is particularly pleasing about this judgement is that the tribunal had their commercial heads on, and understood that contracting through a single person limited company is a prudent and sensible method of providing freelance services, and not just about disguising employment.”

In a recent interview with TAXtv, Boddington commented: “the Revenue has done a very good job of convincing, or trying to convince everybody, that mutuality simply means someone does some work and gets paid for it. In every case that comes before the court, somebody has done some work and been paid for it – and if that were true no case would ever be decided on mutuality of obligation.”

With defeats in IR35 cases such as Novasoft and MBF Design Services accumulating in its files alongside the latest reverse with ECR, Boddington suggested HMRC might be losing its taste for much more litigation on this front.

Continued...

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Comments

That because the government has changed

NeilW | | Permalink

 It's not career enhancing to kick businesses when the Tories are in town.

IR35 and Service Companies

mfwiniberg | | Permalink

This is a reassuring case - despite the fact that my (IT consultancy) company has two employees, plus two other freelance contractors on call, who substitute for me with my largest (but not only) client, I still fear the dead hand of HMRC and IR35 at every moment. The more so since, in this year's employer's PAYE return, the definition of 'service company' has been made so broad that I had no option but to answer 'yes' - in fact, it is hard to imagine many companies now that are not 'service' companies in the definition given - garages, builders (rather than developers), Royal Mail - they are all covered by this new definition.

I look forward to HMRC trying to apply IR35 to the chaiman of Royal Mail...

I've been considering moving to France for a while: it's hard enough trying to make a living in this country as it is, without having to fight one's own government as well.

Northern france is actually closer to my main client in London than where I am now 8)

mike

 

 

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ireallyshouldkn... | | Permalink

Could somone post a link to the actual case? The link I have to the tribunal pages seems to be dead.

Hooray for the contractor

ladylaff | | Permalink

The HMRC should turn its attention to prosecuting billionaire tax dodgers, rather than small contractors many of whom are just eeking out a decent living.  It seems analogous to motorists being fleeced for speeding and parking violations, while car thieves go unpunished.

IR35

bygwyg | | Permalink

Has anyone ever done a "Freedom of Information" query against HMRC asking:

1) How many cases have been investigated under IR35?

2) How many have resulted in prosecutions?

3) How many of those prosections have HMRC won?

4) How much has HMRC raised from those victories?

5) How much has HMRC spent on IR35 investigations since its inception?

If no one has done a FOI, how does one go about it?

Cheers

Andy

 

FOI

Albatross | | Permalink

IR35 - Freedom of Information request

bygwyg | | Permalink

Thank you for the link. Job done; now let's see what they say.

By the way, there's lots of space for information such as your name and address, but the box for the query it so small (now, there's a suprise).

TTFN

 

F o I Request

Peter Tucker | | Permalink

Having made a couple of these requests in the past, can I urge you to ensure that your request is dealt with according to the Act, i.e. within the time limit.

You will have a bit of a problem in getting in touch with HMRC if they are late, as their web based request does not provide any reference which can be quoted back to them to trace the original request.

Response to Mike

asillahi | | Permalink

Not even HMRC would be stupid enough to come after you under IR35. You pass the in business on your own right, substitution and probably MOO and control tests.

FOI

bygwyg | | Permalink

just checked their acknowledgement; it does contain a reference.

Concern

Martin Dore | | Permalink

My concern here is the worry and anxiety that the individual would have had in the past 6 years since the original HMRC assessment.  Going to a Tribunal is a subjective matter with no guarantee of success.  All contractors are in a very similar position – they have the same potential risk that HMRC will visit and raise an assessment under IR35 – thus beginning a long period of worry and uncertainty for that individual.  Tax law shouldn’t be like this, but it is.  To remove this for the individual, our contractor’s strategy protects from IR35 attack and allows contractors to focus on their work.  Please contact us for further information, or view our website, www.matrixcontracts.co.uk

What's next?

North East Acco... | | Permalink

Well done to Elaine and all at accountax!

IR35 is a shocking piece of legislation and should be consigned to the bin. The only worry is that with HMRC suffering so badly in these cases they may just change the law.

What if they make close companies transparent like LLP's?

What if they introduce a close company dividend tax rate?

What if they make ALL payments to close company participators subject to PAYE/NIC?

Never mind just contractors suffering every small company would under any of the above. Whilst I would like to see the back of IR35 lets hope any alternative is not even worse!

quackquack's picture

Holland V HMRC SC 2010

quackquack | | Permalink

Dont under-estimate HMRC.It seems there is no limit to the logic HMRC will employ to attack companies.Mr and Mrs Holland must be relieved at the outcome.In this case HMRC tried to attack the veil of incorporation.Very major legal attack indeed !

IR35 Confudion

Miss Contractor | | Permalink

 As a new contractor I find IR35 all totally confusing, I'm glad that this case was won! I did find this ir35 guide if it's useful to anyone?