IT contractor defeats HMRC over IR35 legislation

Contractor accountants might be interested to read that Elaine Richardson, an IT contractor trading as ECR Consulting, was recently victorious in her IR35 case. The judges at the tribunal hearing ruled that it was clear her business was genuine and therefore did not fall under IR35 legislation.

In 2005, HMRC decided that Richardson was a disguised employee of Vertex Data Science and gave her a £50,000 tax assessment. Ms Richardson was covered by tax investigation insurance because she was a member of the PCG, and Accountax Consulting was appointed to represent her.

In making their ruling, the tribunal judges applied three tests to determine her relationship with Vertex – control, mutuality of obligation and substitution. The judges concluded that Elaine’s company operates from her own home premises, advertises its services and takes on contracts for a variety of clients.

Matt Boddington from Accountax Consulting said he was pleased that the tribunal understood that trading as a single person limited company was a sensible way to provide freelance services and not a way of disguising employment.

HMRC has tried to convince everybody that mutuality means someone works and receives payment for that work. But that is true of every IR35 case that comes to court. The Revenue is now accumulating defeats and could well be losing its taste for many more court cases. The last few IR35 cases that HMRC have prosecuted seem to suggest that the Revenue is eventually tiring of the onerous legislation.

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