IR35 caught contactor wins holiday pay from HMRC

[TestMangler]

HMRC changed the terms of the engagement. She was fully out, operating via her own company. Then deemed caught and TOLD to go on an agency payroll, much like an Office Angel's temp would.

So, under AWR, would you not say she is a 'worker' and entitled to all that a person of that status should have?

Spot On. To my mind, this should have been dragged through the tribunal system/courts years ago when the first ever IR35 case was lost.

Clients and HMRC have been allowed to have their cake and eat it for a long time now with regard to terms of engagement, they want the lack of responsibility of having a 'proper contractor' along with the 'staff mentality' of a perm or FTC.

Creating a mind set where the choice has to be made up front by the client can only be a good thing. You either want a contractor on a B2B basis or you want a temp/perm staff member. Make that choice and behave accordingly.

[simes]

None of us want employment rights. Susan did not want employment rights. She wanted to be engaged as 'in business on her own account' which she had been up until HMRC decided that IR35 should apply. By demanding holiday pay, she is making the point that businesses need to choose to either engage contractors properly, or accept that those 'deemed employees for tax purposes' come with responsibilities.

It is the law. If you are an "agency worker" then under AWR you get holiday pay. If you're not an agency worker, then you're not under SDC and IR35 should not apply.

HMRC cannot cherry pick which bits of the law to obey and which to ignore.

I don't think the majority of contractors will suddenly find themselves working in low paid FTCs - they don't provide the flexibility that businesses want.

Anything that shows HMG what a mess the IR35 reforms are causing is a good thing.

Completely agree with all of this.

And when someone decides they will instruct a legal fight to accrue sick pay under the same circumstances as Susan's then I wonder if this will really upset the IR35 apple cart.

The bit now in Bold and Underlined for me says it all.

And if the HMRC figure that chucking everyone into IR35 positions will Decrease the number of cases coming their way, then they are very much mistaken, imho.

[DaveB]

I am sure there is Nothing less formal about something being settled out of court.

It is a recorded victory for this argument irrespective of where it was settled.

Not in the eyes of the law. In the absence of a legal judgment being handed down there is no precedent set. Without a legal precedent HMRC can continue to argue every claim individually outside the courts and say that the law doesn't require them to provide these benefits. Contractors will be forced to follow the same route of legal action on an individual basis.

If it had gone to court and a legal judgement had been handed down, setting precedent, then every other affected contractor could simply point to that judgement and say "that is what the law says, now comply with it". If HMRC then didn't comply the contractor would have a much better case if and when they did take it back to the courts as it would be a much simpler task to prove that HMRC are not complying with an obligation already established in law.

[malvolio]

Not in the eyes of the law. In the absence of a legal judgment being handed down there is no precedent set. Without a legal precedent HMRC can continue to argue every claim individually outside the courts and say that the law doesn't require them to provide these benefits. Contractors will be forced to follow the same route of legal action on an individual basis.

If it had gone to court and a legal judgement had been handed down, setting precedent, then every other affected contractor could simply point to that judgement and say "that is what the law says, now comply with it". If HMRC then didn't comply the contractor would have a much better case if and when they did take it back to the courts as it would be a much simpler task to prove that HMRC are not complying with an obligation already established in law.

Hmmm...

So why won't we now see anyone who's been moved to an IR35-caught contract in the PS claiming back-dated holiday pay, given the wide publicity this decision has generated? You don't need case law to make the case, merely point to the fact that HMRC itself agreed with the contractor's position. I'm sure IPSE would help out with legalities if asked.

Its's not actually about IR35 as such, it's about being classified as an agency worker (contracted through a third party, paid net of tax, under strong D&C) and so coming under the protection and obligations of the AWR.

[DaveB]

Hmmm...

So why won't we now see anyone who's been moved to an IR35-caught contract in the PS claiming back-dated holiday pay, given the wide publicity this decision has generated? You don't need case law to make the case, merely point to the fact that HMRC itself agreed with the contractor's position. I'm sure IPSE would help out with legalities if asked.

Its's not actually about IR35 as such, it's about being classified as an agency worker (contracted through a third party, paid net of tax, under strong D&C) and so coming under the protection and obligations of the AWR.

You may well see it, and I'm sure IPSE would help, they are already asking for anyone else in the same circumstances to come forward. However, by settling before it went to court HMRC can now argue every case individually, from scratch, because there is no precedent to force them to change policy. Every contractor affected will have to go through the same process as Susan did and re-argue the case. If they refer to this settlement HMRC can say it was not legally binding, not relevant and that there is no case law supporting the claim. Once it gets to a court and a judge rules in favour of the claimant that sets legal precedent that can be referred to for every other subsequent case. That is what would open the flood gates for claims as it would be a much lower burden of proof on the claimant to show that HMRC were not meeting their legal obligations, as those obligation would now have been clarified and set in law.

[malvolio]

You may well see it, and I'm sure IPSE would help, they are already asking for anyone else in the same circumstances to come forward. However, by settling before it went to court HMRC can now argue every case individually, from scratch, because there is no precedent to force them to change policy. Every contractor affected will have to go through the same process as Susan did and re-argue the case. If they refer to this settlement HMRC can say it was not legally binding, not relevant and that there is no case law supporting the claim. Once it gets to a court and a judge rules in favour of the claimant that sets legal precedent that can be referred to for every other subsequent case. That is what would open the flood gates for claims as it would be a much lower burden of proof on the claimant to show that HMRC were not meeting their legal obligations, as those obligation would now have been clarified and set in law.

Yes, I understand that. Bu a flood of identical cases would eventually lead to someone taking it to a higher level. HMRC might want to stonewall every challenge, like they do with IR35 cases when they find the contractor has proper representation, but we have to play the long game here. Anything that gets HMRC's disinformation out to the wider public will help.

And unlike IR35 there are tens of thousands of potential cases here...

[DaveB]

Yes, I understand that. Bu a flood of identical cases would eventually lead to someone taking it to a higher level. HMRC might want to stonewall every challenge, like they do with IR35 cases when they find the contractor has proper representation, but we have to play the long game here. Anything that gets HMRC's disinformation out to the wider public will help.

And unlike IR35 there are tens of thousands of potential cases here...

Yes I'm sure it would, but that was never the point of the discussion.

Simes put forward the view that a settlement out of court held as much weight legally as an actual judgement. It doesn't, and that is why HMRC settled out of court. They wanted to avoid setting a precedent and leaving themselves with a legally enforceable liability.

Without criticising IPSE, they got the result they wanted for Susan, a bigger win would have been to refuse the HMRC settlement offer and go to court for a formal judgement. That is a risky strategy though as it wouldn't have been a guaranteed win and would have required Susan to continue to fight and to appear in court herself. Something she may not have wanted to do at that point.

[northernladuk]

Without criticising IPSE, they got the result they wanted for Susan, a bigger win would have been to refuse the HMRC settlement offer and go to court for a formal judgement. That is a risky strategy though as it wouldn't have been a guaranteed win and would have required Susan to continue to fight and to appear in court herself. Something she may not have wanted to do at that point.

I did wonder this myself. I am sure she said somewhere it wasn't about the money and more about principle but then took the offer which seems to have left a gaping hole in the wider picture. A win in court would have at least set a precedent.

[mudskipper]

I did wonder this myself. I am sure she said somewhere it wasn't about the money and more about principle but then took the offer which seems to have left a gaping hole in the wider picture. A win in court would have at least set a precedent.

Susan had asked for holiday pay, and no gagging clause, and that was what she was offered (at the 11th hour), so the courts would have taken a very dim view if she'd proceeded to waste their time.

It's quite possible that HMRC settled because they were in a lose/lose situation. As an agency worker she is entitled to transparent holiday pay. If the court had found AWR did not apply, that would have been another blow for CEST and their inside determination.

Susan's story is worth a read if you haven't seen it.

Meet the woman who took on HMRC, and won | IPSE

[DeludedKitten]

Not in the eyes of the law. In the absence of a legal judgment being handed down there is no precedent set. Without a legal precedent HMRC can continue to argue every claim individually outside the courts and say that the law doesn't require them to provide these benefits. Contractors will be forced to follow the same route of legal action on an individual basis.

As I understand it, an employment tribunal wouldn't set the precedent - I think it needs to go to an appeals tribunal for the precedent to be formally set. So unless HMRC et al wanted to take the fight further, it wouldn't have made any difference to creating a precedent.