HMRC wins first IR35 case in 9 years

[jamesbrown]

She had a lot of autonomy over content. However her editor, as the BBC rep, had total autonomy over what was broadcast.

Right. That seems to have been the determining factor here; the “what” element of control. Also, it appears to have been more about the principle of editorial control over what was broadcast, rather than the day-to-day practicalities.

She also made some grave errors prior to and early in the investigation, relying on non-specialist advice about status and meeting HMRC without adaequate representation.

[sal]

The bigger story - and one that is being ignored - is why she made the switch from employee to contractor. It almost certainly wasn't her idea, and I know several people who were presented with the same Hobson's choice.

It's in the story:

Ackroyd noted in her statement that her decision to operate via a limited company was upon the insistence of the BBC. After checking the terms of the arrangement with her accountant, Ackroyd was advised that everything was in order.

[Fred Bloggs]

Ackroyd noted in her statement that her decision to operate via a limited company was upon the insistence of the BBC. After checking the terms of the arrangement with her accountant, Ackroyd was advised that everything was in order.

And everything was/is in order. All she needed to do was to work within IR35 and pay PAYE on all her turnover minus 10%. So, the accountant was, it appears, correct.

[jamesbrown]

The main factor "protecting" most contractors is the length of the contract, in my view any contractor who would be at one client for several years will be at the same risk. Sure, they often have substitution clauses, but never exercised and they generally don't have any other clients.

If you're not with a client for more than a few months it probably isn't worthwhile for HMRC to pursue a case.

I think there’s some merit to this, but it isn’t a major factor. In practice, HMRC won’t know the length of an engagement upfront and, once opened, they seem to pursue a case without much regard to cost effectiveness. Also, the case law is clear about the absence of a mechanistic relationship with length of engagement. I think the main thing “protecting” contractors is the sheer volume of contractors. As others have said, this is why they want to shift the policing and liability to clients.

[pictavia]

The main factor "protecting" most contractors is the length of the contract, in my view any contractor who would be at one client for several years will be at the same risk. Sure, they often have substitution clauses, but never exercised and they generally don't have any other clients.

If you're not with a client for more than a few months it probably isn't worthwhile for HMRC to pursue a case.

I agree with this. I recently spoke to a client who was looking to hire a contractor via an agency. It was clear during the conversation that the previous contractor had been working on various tasks on-demand over 5 years. This was a private sector software house and obviously inside IR35 given the level of SDC and multi-stage interview process.

[northernladuk]

I agree with this. I recently spoke to a client who was looking to hire a contractor via an agency. It was clear during the conversation that the previous contractor had been working on various tasks on-demand over 5 years. This was a private sector software house and obviously inside IR35 given the level of SDC and multi-stage interview process.

Since when did the interview process have any bearing on IR35??

[radish2008]

Since when did the interview process have any bearing on IR35??

I think that's the problem with IR35.

Everyone is an expert. The BBC case will be appealed I think.

[northernladuk]

I think that's the problem with IR35.

Everyone is an expert.

Clearly not.

[Jessica@WhiteFieldTax]

Sorry, could elaborate on that a bit please? Thanks.

The IR35 is a corporate liability, not a personal one. HMRC need to run though another set of hoops to make it a personal liability, and its not a forgone conclusions they will be successful - we've had Accountax negotiate away personal liability on an IR35 fail case, albeit about 15 years ago, on grounds that director had reasonable belief that the outside IR35 decision was accurate.

However if the PSC is stuffed full of asset / warchest then HMRCs task is easier.

Its common sense - keep investment and trading separate. Short term cost on drawing funds as dividend, but long term protection of assets.

PS - relying on HMRC not being able to prove personal liability isn't first line planning. Its a backup. Do due diligence on every contract, which is what the guy I refer to above had done and could prove.

[Alan @ BroomeAffinity]

Sorry, could elaborate on that a bit please? Thanks.

Presumably if the investment property was held outside the company then it wouldn’t be at risk in the ensuing bunfight. A company assets can be sold to pay off a company debt. A personal one can’t.