IR35 - The Lottery (Part 1) Workers 2 v HMRC 2 | AccountingWEB

IR35 - The Lottery (Part 1) Workers 2 v HMRC 2

"Extra Time Being Played" - Statements made in front of the Commissioners can seem more persuasive than the actual contract, but how can the worker be expected to know what will be said by the end-client at tribunal?

I write as a former Status Inspector who was deeply involved in the preparation of two of the four recent IR 35 cases that have appeared before the Special Commissioners in recent months.

Having now left the ivory tower and working this side of the street, I hope that my insight into the developments illustrated in these cases will help to show the way forward.


» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.


Steve H.

IANTO | | Permalink

Well said that man!

Might I also add that anyone "caught" by IR35 will pay more tax on any level of income than any other individual or organisation would, as a result of having to pay Employers' NI as well as Employee's NI.

John Williams

Anonymous | | Permalink

Saw a mention of my name, but have to confess that I have not been deliberately ignoring your posts - I was just away on holiday. Give me a few days to catch up and I am sure that I will have some more to say ; )

not exactly, Jackson

Anonymous | | Permalink

(you're not by any chance an HMRC mole, are you?)
First - many contractors didn't actually opt for that status: it was forced upon them by employers who saw advantage in no longer providing paid holidays, sick pay, pension contributions, etc. and in the flexibility of having IT people on short-term contracts. IR35 ignores the fact that these contractors no longer have most of the benefits of permanent employment.
Second - many other contractors are genuinely in business on their own account - whether forced into that position, or voluntarily - but if found to be caught by IR35 are unable to grow their businesses. For them there is no level playing-field because HMRC says they're "really" employed by their end-client of the day.
Third - "Friday to Monday" NIC cheats is an emotive phrase (at about the intellectual level of a Sun newspaper headline) which is an insult to the vast majority of honest IT contractors who struggle to cope with the uncertainty and unfairness of IR35.

Mr Williams and his mates are getting bitten on the bum are they

AnonymousUser | | Permalink

It is surely the IT professional who is to blame for IR 35?

It was the "Friday to Monday" NIC cheats who prompted IR 35.

It seems only fair that they should be the ones singled out by HMRC for special attention.

Just because you're paranoid ...

Anonymous | | Permalink

... doesn't mean they're not really out to get you.

I think John is quite right to be paranoid. Furthermore, it seems that the government is getting a bit more sure of itself after IR35.

Even though the timing proves it was merely a kneejerk reaction to the Arctic Systems case, the "family business tax" (even if it gets watered down) is deliberately drawn so widely that it could potentially affect almost every small business, whether agricultural, manufacturing, or service, and if it happens that HMRC actually concentrate their investigations on IT contractors, nobody will be able to prove it because HMRC probably won't be collecting statistics on the type of business they are targetting. So no case for the European courts. Also, of course, after the climbdowns on non-doms and CGT, and the Northern Rock debacle, I really can't see AD backing down on the FBT and still hanging on to his job. Despite 106 cross-party signatures (and counting) on the early-day motion to abandon the whole idea.


IANTO | | Permalink

I believe that the weight of evidence, i.e. the regulations, IR35, MSC and the latest Family Business Tax, and the individuals who have been targetted and will be targetted, might indicate that HMG is indeed only targetting IT professionals, which clearly is illegal under EU Law. This was an issue which was explored in the Judicial Review of IR35 brought by the PCG. However, although we all believed this to be the case, at that time it could not be proven. Time will tell.


IANTO | | Permalink

The problem with fora is that it is difficult to identify "tongue in cheek" posts, and also those posts that are deliberatley set to create controversy. I'm afraid you're a victim!

However, I did engage in a politically motivated case to attemp to raise the profile of the unfairness of IR35. It was quite interesting that whereas the other case against Hewlett Packard which ran in parallel to mine, and which was brought for other reasons, was extensively analyzed by the accounting fraternity, mine was almost completely ignored. You can draw your own conclusions from those facts. I know what my own conclusions are, which you might be able to deduce from my posts, especially the post I made in response to Nichola Ross Martin's examples. Surprisingly she has remained silent since I made that post.

Finally, as long as I abide by the rules, I am as entitled to, just as any other member of AccountingWeb is, post my personal opinion on this forum. The problem with free speech is that sometimes individuals will say things which the majority do not like or agree with, but as the French say c'est la vie!


MikeBellisimo | | Permalink

I personally struggle to think of an area of Self-Assessment where your current liability will be established by the evidence of an unconnected third party given at a future date.

Self-Assessment is supposed to be based on making use of the evidence available to you at the time.

The implementation of IR35 allows HMCE to draw on present and future information that is not available to you in order to claim that an assessment made is not vaild.

Paranoia ... on the other hand

mikewhit | | Permalink

There seems to have been such a plethora of Brown-inspired measures against John and his like, beginning with IR35, that could lead a suspicious person to think they were being persecuted !

(And don't forget the recent MSC stuff either.)


thehaggis | | Permalink


You are a 21st century IT professional with a huge chip on your shoulder. There are a plethora of web forums that you could populate with your conspiracy theories; this is not one of them.

Frankly, to compare yourself to a Tolpuddle Martyr suggests delusion to such an extent that you ought to consider seeking help.

IR35 stuff

IANTO | | Permalink

It is to be expected that no one from the professions will comment on the political angle because they are part of the "establishment", but I'm not constrained by such niceties. I speak my mind and as I have already demonstrated in the courts, I am prepared to challenge the "system" and criticise the "establishment" even if it may be detrimental to me. (recently we had a high profile firebrand of the 60's as Secretary of State for Wales!)

None of us would enjoy the working environment that the 21st century offers us if it were not for the sacrifices and the risks that individuals like the Tolpuddle Martyrs made and took. In a very small way, I hope I have contributed to such elevated principles.

Liability of End Client

NeilW | | Permalink

It was determined many years ago that the end client could potentially scupper any amount of careful IR35 planning by simply stating that the actual situation was something different to what was actually written down. The notional contract being such a ephemeral beast.

And that will continue until the end client is contractually required to keep their mouth shut and nose out of other people's tax affairs.

One of the evils of IR35 is that the end client is not affected at all by the arrangements. I can guarantee that their answers would have been more guarded if the individual had been self-employed.


IR35 v's EAT

IANTO | | Permalink

There were two cases against HP, and I brought one of them. Mine wasn't instigated by an IR35 challenge and the other was not either. Both cases ran parallel and the ET waited 5 months for the first case to be appealed by HP before they gave a judgement on my case. Political influence or not?

Tax and Employment

MikeBellisimo | | Permalink


ISTR it has been tried - one of the first cases was a contractor vs HP. [I cannot cite, sorry]

A long-term contract was terminated when HP cut back on expenditure. HMCE went after him for IR35 and he went after HP for employment rights. He lost both - the difference between deemed and actual.

IR35 stuff

IANTO | | Permalink

I think you miss the point entirely. The issue is the inconsitency in the law in this country and the political and spiteful targetting of IT professionals. I believe that the ruling classes are engaged in a long term plan to roll back the last 100 years of emancipation of the working classes, and the "professions" are helping them do this by not robustly opposing issues like IR35.

If IR35 says the individual is a "disguised employee" then the EAT should come to the same conclusion, given that the tests, except the construction of the hypothetical contract, are largely the same.

Clearly, HMG is afraid of the issues involved and so far no one person, for the same engagement has presented the issues to both courts. I am totally convinced that there was political interference in my case (J.M.Williams v.s Hewlett Packard and Certes Computing). Why else would my eminent legal team withdraw 5 days before my case leaving me to present it in the EAT myself?

The judge certainly didn't like many of the political statements I made in the case including the belief that many large organisations use contractors of all types to evade their employment responsibilities.

Incidentally, as I've reported many times in many different fora, I believe HMRC withdrew their intended challenge of me under IR35 when I lost in the EAT - they couldn't afford the political fallout of either decision of my status by the Commissioners.

IR35 is not a tax issue , it's a political issue and I continue to be fiercely opposed to it and will continue to campaign against it at every opportunity.

IR35 v's EAT

IANTO | | Permalink

I believe your statement

"Unfortunately it has already been well established that a ruling in favour of IR35 which is based on deemed contracts has no impact on a ruling for/against employment which is based on actual contracts." to be legally incorrect.

No one person who has been found "caught" under IR35 has then approached the ET for a judgement on the same engagement, let alone has received a converse judgement. Please correct me with specific case law if I'm wrong.

However, it is legally unlikely that this will happen. In my own case, John M. Williams v's Hewlett Packard and Certes computing, the EAT judged that I was not an employee of HP and HMRC withdrew their intended challenge of me under IR35. They could not afford to create such a legal precedent as we are discussing in this thread. It would also have been political dynamite.

So please, let's stick to the facts and not propagate opinion. It is my contention that there is no case law to support your statement.

Different Beasts

MikeBellisimo | | Permalink

Unfortunately it has already been well established that a ruling in favour of IR35 which is based on deemed contracts has no impact on a ruling for/against employment which is based on actual contracts.

The gap that exists appears to be deliberate.

What really irritates is that "Tax doesn't have to be taxing" and yet for IR35 cases it's basically going to be impossible in many cases for a contractor to make an accurate determination at the point at which a tax return is required. The safest position is of course to pay whether or not it's actually due but that is extortion not taxation.

Ah well, at least we now all own a nice bank into which our taxes can sit earning interest until the due date.

IR35 losses

IANTO | | Permalink

Well gentlemen, the answer to this problem is for those caught by "arbitary" and "biased " (and I understand the legal implications of that word) decisions, to sue for employment rights. I'm sure there would be some poltical gnashing of teeth if this were to be promoted and supported. Yes, I know there is a time limit for lodging such claims, but the Law should allow an out of time appeal in such cases. But then the Law is not always just!

Additionally ...

mikewhit | | Permalink

... if the worker was indisposed for some reason, but had arranged a competent and trusted former associate to stand in, would the client manager have been so adamant that only the named worker would do ?

I don't really think so, but of course this is untestable at a hearing - however, the "reality" (as the HMRC like to put it) is probably that a competent sub would continue the work almost seamlessly. That indeed is the nature of occupation.

It also needs to be asked why the client manager was so insistent in the face of contracts to the contrary, unless it was for reason of some perceived 'what I say, goes' macho culture.

The cases reported here where HMRC won appear to show that they just keep asking different people until they get the answer they want, then use that answer and disregard the rest - not really conducive to respect for the Revenue ...


AnonymousUser | | Permalink

As the principal of the firm who initially handled the First Word case, before passing it on the Qdos, then Accountax, words cannot describe the frustrations stemming from the fact that it took 3 years or so for HMRC to fail in disproving the evidence that we set out in the early days of the case. "Chatham House" rules probably bar me from reporting here the conversation I held with an HMRC inspector about the case in the early days, save to say had that Inspectors pragmatic views been carried forward HMRC wouldn't have waisted time and money fighting a flawed case, and my client would have been spared nearly 6 years of fighting a tax dispute.