It was announced late yesterday that Roger Tilbury, backed by the Professional Contractors Group, has won his IR35 case against the Inland Revenue at the Special Commissioners.
Dave Smith of Accountax defended Roger during the case.
Roger was contracting for Ford through Compucare. He had been at Ford for a total of 9 years – and yet he was not judged to be a ‘˜disguised employee‘ of Ford.
When IR35 was first mooted, one of the main claims about it was that it would make any contractor who worked more than 6 months at any one site a ‘˜disguised employee‘ of the company. Length of tenure was supposed to be a surefire sign of the contractor really being an employee.
However, this idea has been blown right out of the water. If you can be at a company for 9 years and not be a ‘˜disguised employee‘ then when can you be?
Of course, the Inland Revenue made a major blunder, which they admitted in court, of trying to claim that Roger was a ‘˜disguised employee‘ of Ford and not of Compucare, when Compucare had taken over the running of the project.
Roger‘s appeal was based on the fact that he had a substitution clause, that Ford had a lack of control over his work, and that there was no mutuality of obligation between Roger‘s company and his client.
In their last piece of research, the PCG discovered that 85% of its members had never paid any IR35 tax.
Accountancy companies have been telling us that only about half the numbers of contractors now are declaring themselves caught by IR35 compared to just two years ago, saying that two-thirds to three-quarters of their clients are now outside it.
At this rate hardly anybody will be paying it in the future and the famed IR35 legislation may be on its last legs. This really would be a triumph for the PCG who were set up for this very purpose.
Enforced Pay Cut
The judgment t hasn‘t been seen yet, so we are not able to pore over the reasons for the victory yet. It will be interesting to see if the fact that Roger had an enforced pay cut of 20% was a factor taking him outside IR35. Companies can‘t legally cut the pay of their employees.
However, many contractors have had to endure forced pay cuts during this downturn. There may be bonus for them if this means that they can no longer be considered to be disguised employees.
The lessons so far from the case are that it is crazy to ask the Inland Revenue for their verdict on whether you are caught by IR35 or not. That‘s like asking them if they want extra money or not. It‘s also very time consuming to get it overturned as Roger Tilbury has found.
The other lesson is that going to the Special Commissioners is the best route to take when you are in dispute with the Inland Revenue.
We await further news on the verdict and will bring the details to you when we have them.
Watch this space!