Contractor vs Government Dept – IR35 Case
I hope everyone had a good bank holiday last weekend. Even though we had some storms here in South Wales, all of us in the office still made the most of the extra day off.
For this week’s blog, we will be looking at the battle between a contractor and the HMRC over IR35, and how the contractor won the case against the HMRC for the contract to be declared outside of IR35 and raising questions of the Government’s understanding of IR35.
The contractor was providing Business Analyst services through a personal service company to the Department of Work and Pensions, where the contract was declared inside IR35. Although the contractor disagreed with this and took it further. After the hearing took place, the judge decided that the contract belonged outside IR35 as there was insufficient right of control over the working methods. The judge also disagreed with HMRC’s interpretation of mutuality of obligation (MOO) and the right of substitution.
The CEO of the company that represented the contractor at the hearing stated: “Despite HMRC implementing and enforcing the rules, this verdict shows they can’t accurately assess a contractor’s IR35 status. The Government is serious about clamping down on what they believe to be non-compliance, but worryingly, can’t recognise whether a contractor belongs inside or outside IR35. That the individual was working on a Government project simply adds to the irony. This case is further proof that IR35 needs simplifying, and HMRC must rethink its IR35 strategy completely. Clearly, this is no time to extend public sector changes to the private sector”.
A large number of contractors are dismissing contracts due to them being inside IR35. If the government is mis-assessing the IR35 status of contracts and being incorrectly declared, not only are contractors missing out on opportunities, but the individual departments within the government departments are also missing out on good candidates.
If the judge has decided on this occasion that the contract should be outside IR35, how many other contractors are out there in the same position where their contracts have been declared inside IR35 but should rightfully be outside IR35. What is your opinion on this? If someone thinks their contract has been declared inside IR35 incorrectly, do you think it should be challenged? Let us know in the comments below.
I hope everyone has a great weekend.