Another high profile IR35 loss for HMRC

[DaveB]

HMRC suffers another damaging IR35 tribunal defeat as presenter Kaye Adams wins appeal

And another example of HMRC not understanding it's own rules or how to apply them.

[eazy]

Full Judgement

Full Judgement
http://financeandtax.decisions.tribu...52/TC07088.pdf


IPSE has warned that HMRC’s tax case defeat by Kaye Adams shows it does not understand its own IR35 legislation.
HMRC lose yet another IR35 case to BBC and Loose Women star | IPSE

[BlasterBates]

Note the fact that she had several other engagements in addition to the BBC and this was central to the decision. The key is to have more than one client, or move around frequently.

Someone spending 2 or 3 months at each client will have no problem in my view.

[DaveB]

Note the fact that she had several other engagements in addition to the BBC and this was central to the decision. The key is to have more than one client, or move around frequently.

Someone spending 2 or 3 months at each client will have no problem in my view.

Not just that, but also an absence of direction and control - BBC were not issuing orders and she had editorial control over the content of the programmes.

The judge also set aside the contract and focused on the working practices, something HMRC regularly tries to do in their favour.

[simes]

Reading the Loose Women IR35 win on the front page, it makes me realise what an utter crapshoot we're in for. This lady had 30% earnings from sources other than the BBC. If she was newly introduced to the Beeb, would the Beeb really ask, or even care, if she had earnings from elsewhere before they chucked her inside IR35? This sort of knowledge only pops up in court cases.

For my part, I have 10% earnings from elsewhere to my LtdCo, but I am damn sure new clients will neither understand nor care.

And then there is this quote from the case...

“While the written contract is, of course, hugely important, actual working practices will often be pivotal in an IR35 case.”

At the time of writing the new contract, working practices may yet to be understood or demarcated. It is one reason why for my part, I have Never had any of my contracts reviewed for IR35. Instead ensuring the working practices demonstrate what would be needed if a court case loomed...

I feel sorry for the nation's Private Sector companies. It is seemingly utterly hopeless unless a process can be put into place to legally and retroactively claw back - Everything.

[eazy]

Contract Reviews

I have Never had any of my contracts reviewed for IR35

Following IR35 since inception, I have come to the conclusion that if a contract is not good, HMRC will deem it caught by IR35 without looking at working practices. HMRC will only look at working practices if the contract is good wrt IR35 (personal service, control & MOO).

Vast majority of the cases never end up at tax tribunals, that's where working practices are looked at in detail. If you are investigated, you don't want it to drag on and end up at FTT at great expense and stress. In my opinion ensuring contracts can stand up to scrutiny by having them reviewed is part of due diligence with appropriate tax investigation insurance.

[Maslins]

In my opinion ensuring contracts can stand up to scrutiny by having them reviewed is part of due diligence with appropriate tax investigation insurance.

Do remember that from April 2020 the end client will care a lot more whether both the contract and working practices suggest outside IR35 or not. Increasingly I'm thinking Apr 2020 changes will be a damp squib, and only a positive thing for contractors (please don't quote me on this if in 12 months I'm proved horribly wrong!).

Prior to April 2020:
- contractor wants it to be outside IR35,
- HMRC wants it to be inside IR35,
- end client doesn't care (so isn't always particularly helpful in an HMRC challenge).
1 vs 1, where it's big HMRC vs little contractor.

Post April 2020:
- contractor wants it to be outside IR35,
- HMRC wants it to be inside IR35,
- end client wants it to be outside IR35.
2 vs 1, where it's contractor plus well insured big client with clever lawyers vs HMRC.

The end client will be much more proactive in helping ensure both contracts and working practices are IR35 friendly.

The contractor then gets the tax benefits of being considered outside IR35, with no risk of IR35 investigation (for the contractor). That nasty thing that stops some contractors sleeping at night, where even though they're fairly confident they're outside IR35, they know that if HMRC argue otherwise they've got a massive fight on their hands. All that fear can go away, as it's on the end client's shoulders now.

Sorry, deviation from the subject/OP...but the more high profile cases HMRC lose in the run up to Apr 2020, the more confident end clients are likely to be that leaning towards outside is only a small risk.

[northernladuk]

I have Never had any of my contracts reviewed for IR35

Following IR35 since inception, I have come to the conclusion that if a contract is not good, HMRC will deem it caught by IR35 without looking at working practices. HMRC will only look at working practices if the contract is good wrt IR35 (personal service, control & MOO).

Vast majority of the cases never end up at tax tribunals, that's where working practices are looked at in detail. If you are investigated, you don't want it to drag on and end up at FTT at great expense and stress. In my opinion ensuring contracts can stand up to scrutiny by having them reviewed is part of due diligence with appropriate tax investigation insurance.

Absolutely this. To not have contracts checked when you can get it free with some insurance products or less than £100 without is, IMO, just ridiculous.

[BlueSharp]

I have Never had any of my contracts reviewed for IR35.

Why would HMRC look at working practices if they can nail you for a poor contract? I get every contract reviewed as it shows due diligence and could prevent me from paying interest and penalties if HMRC disagree and win an outside determination. It could also prevent the tax due being transferred from the Ltd to me if the Ltd was insolvent due to the tax claim.

[simes]

I thought my comment would derive reaction...

And to be fair, you're all probably right that a belt and braces approach is perhaps better.

But, I doubt very much that an investigation is based first on purely a contract review by the HMRC. It is more likely that 'ones number is up' for a looksee. And based on the cases I've read about, and the way the HMRC ploughs on irrespective of an obvious pointer to being deemed outside, I would prefer just to leave well alone until someone decides to 'roll the dice'.

To each their own of course. But, as a business looking at the bottom line, spending multiples of £100's for every contract which may still then lead to the time, energy and expense of court, would be a waste of money.