New IR35 defeat sends shivers through contracting community


Tide turning as Inland Revenue win new IR35 case

Not so long ago it seemed that the Inland Revenue was on the retreat with IR35, losing case after case, and fewer and fewer contractors were paying it. Now a new victory appears to put the Inland Revenue back in charge.

Their latest win comes against Future On Line, the vehicle for Shane Roberts, who is an IT contractor.

He won a contract through agency Elan to do some work for EDS. He was working as a tester with his own team and reported to an EDS line manager.

The initial contract was for three months, but he ended up being there for three years.

The end customer was the Department of Work and Pensions.

Substitution Clause

He had a substitution clause in his contract, but the substitute could only be provided with the written consent of EDS.

He was being paid £45 an hour for 37.5 hours a week.

Shane assembled a testing team, interviewing 160 candidates for the jobs. He was down as Systems Test Operational Manager on EDS‘s organisation chart.

He was on site most of the time but he did some work from home.

One of the reasons that this case is so disappointing is that the Special Commissioner hearing the case was the same one who had ruled in favour of Tilbury in his IR35 case.

Fighting Back

It looks now as if the Inland Revenue are learning their lessons and fighting back on IR35. It doesn‘t look as if IR35 is as dead and buried as it looked a while back, with the PCG winning case after case.

Accountants told us last year that only half the number of contractors were declaring themselves caught by IR35 compared to two years earlier.

A poll on our site showed that only about one-in-seven contractors were now caught by it.

However, with recent IR35 victories by the Inland Revenue, it looks as if the tide may be about to turn.