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They're After You
Most contractors must dread the approach from the Inland Revenue when they have decided that you are caught by IR35. The first step is to try and convince them that you aren't, hopefully with the aid of an accountant. If you are a member of the Professional Contractors Groups (PCG) tax insurance scheme then they will help you all the way in conjunction with their partners Qdos.
If not, then you need to know what you can do and what is happening to you. If you can't convince them with your accountant's help that you are not captured by IR35, then you will need to take the next step. However, despite what you are thinking, you probably won't need to.
Cricket Score
The PCG have a 108-1 record in winning tax cases against the Inland Revenue. More than 90 of these involve IR35. Most of those cases don't need to take the next step up the line. Also, other accountancy firms have good records, and I'm told that one has a 38-0 record, although I don't know how many of those involve IR35.
However, if the Inland Revenue still won't buy it, you will be given the choice as to the next step. Even if, for some reason that you are not, make sure that get that choice.
Your Choice
You will get a choice as to whether to go to the General Commissioner or to the Special Commissioner.
The advantages of going to the General Commissioner are that you will get an answer more quickly, and therefore it will be cheaper for you. The downside (or possible upside) is that the General Commissioners are less qualified than the Special Commissioners. They are more or less lay people - a bit like local magistrates.
The Special Commissioners are a lot better qualified and knowledgeable. They tend to be ex-Inland Revenue people or accountants etc. Their brief is to be independent arbiters, even if they are ex-Revenue men.
Simple or Difficult
The idea is that you would go to the General Commissioners for simple cases, but for more complicated cases you would go to the Special Commissioners.
However, it is not the case that if you go to the General Commissioner first, and don't like the verdict, that you can then go to the Special Commissioners to get it reversed.
Both the General Commissioner and the Special Commissioner are appointed by, and are responsible to, the Lord Chancellor's Office.
Next Step
After going to the General or Special Commissioners, the next step is the High Court. In practice the major accountancy firms that are involved with contractors are advising that you should go to the Special Commissioners first. It may be cheaper and quicker to go to the General Commissioner, but not if the next step is the High Court which could cost you in excess of £50,000.
The advantage of going to the Special Commissioner is that they are experts, probably more expert than the Inland Revenue, and are far less likely to make a mistake, resulting in your going to the High Court.
In the successful Lime-IT case, Lisa Fernley won it very decisively at the Special Commissioners. In the current High Court case, Gordon Stutchbury, lost his at the General Commissioners, although, it has to be said that he represented himself.
However, if the major IT accountancy firms are recommending the Special Commissioners, then it would be wise to take their advice.
P.S. The Gordon Stutchbury IR35 case will be heard at 10:30 today in the High Court. Look into our General Forum for news or on our articles page.
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