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IR35 applies to IT consultant

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10th Sep 2008
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The High Court has held that the IR35 (personal service company) rules apply to the services of an IT consultant.

The lack of success of the appeal against an earlier ruling of the Special Commissioners, that IR35 should apply to his IT contract is a huge blow for Jon Bessell, owner of Dragonfly Consultancy Limited and the Professional Contractors Group (PCG) who supported him.

Speaking after the judgment was delivered, Mr Bessell said: “I am devastated by today’s news; not only does it affect my family and me, but all the other freelance professional consultants who are trying to earn an honest living. I was never an employee of the AA and I simply cannot understand how the High Court has reached its decision. It’s a travesty of justice. I would like to thank all those who have supported me through this case, in particular the Professional Contractors Group which has been superb throughout.”

PCG’s managing director John Brazier commented: “This is a potentially massive blow to freelancers throughout the country. This case threatens the long-established defences against IR35; we will be looking at the judgment in very close detail to work out its full implications.”

The Practical Law Company sums up the problem that this case has exposed in their weekly tax review:

"The decision shows that it is difficult in practice for arrangements relating to the services of highly skilled workers to fall outside the IR35 rules because the client is unlikely to accept an unfettered right of substitution in this situation."

Ex-inspector Steve Gretton gives his full analysis of the decision.

Case: Dragonfly Consulting Limited v The Commissioners for Her Majesty and Revenue & Customs 2008 EWHC 2113(Ch)

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Replies (6)

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By AnonymousUser
06th Oct 2008 12:06

Actors etc
Does that mean all actors, TV presenters etc. are employees?

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By AnonymousUser
17th Sep 2008 09:23

Damn cheek
for the even older ones it was Reg 29.

I am not old.

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By billgilcom
13th Sep 2008 01:35

Is it Reg 72(5) A or B?
for the older members of our audience it was of course Reg 42(B) and for the even older ones it was Reg 29. Doesn't time pass quickly in taxation and when you're enjoying yourself
regards
[email protected]

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By billgilcom
13th Sep 2008 01:29

OOps
Sorry Nichola,
I have now taken my tongue out of my cheek.....
but seriously this has always been part of the "nasty taste in the mouth" that the real culprits in all this are the "End Users" and "HMRC".

Presumably it's cheaper to go to the High Court than proceed via Regulation 80 or 72 - OK tongue firmly put back. Maybe they might even go for a windfall tax on the Oil & Energy companies or is that too political. Roll on Alex Salmond's LIT - oops sorry Local Income Tax to replace the council tax.
regards
[email protected]
http://www.wamstaxltd.com

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By User deleted
11th Sep 2008 16:57

You too,
I have been wondering how on earth this can happen, as I suppose that the obligation of the taxing authority is to get as much tax as possible as cheaply as possible, and so...

and so...

why go to the High Court rather than engage the 'employer"?

Obviously, that would disrupt the whole of the agency market, and could even upset the balance sheets of some of our biggest companies. That's why, and this is why we have IR35.

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By billgilcom
11th Sep 2008 14:26

So the clients client said "Employee"
What surprises me is that the big boys continue to get away with having employees on the cheap and without either the obligations or costs of an employer to their employee or the burdens of operating PAYE - yet they can turn round and say hey they were employees all the time.
regards
[email protected]
http://www.wamstaxltd.com

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