Paul Hawksbee Wins IR35 Case
There’s more good news for UK contractors as comedian Paul Hawksbee wins IR35 case against HMRC at a tax tribunal. He won because the tribunal judges believed his contracts to be outside IR35 despite HMRC deciding them to be inside.
They were claiming 140,000 pounds in back tax, interest and penalties against him. HMRC have now lost 12 out of their last 14 cases against contractors with one draw. The draw was when the tribunal said one locum urologist’s contract was inside IR35 and another one outside.
Paul Hawksbee is a presenter of Talksport. HMRC looked at his work for them between 2012 an 2015. They reckoned it was inside IR35. The tax tribunal said it wasn’t.
IR35 Factors Considered by the Tax Tribunal
- Part and Parcel of the Organisation
- Financial Risk
- Mutuality of Obligation
- Supervision, Direction and Control
- The Right of Substitution
Part and Parcel of the Organisation
HMRC claimed that because he was there so long Paul Hawksbee was part and parcel of the organisation. It was an oft-quoted belief by contractors that if you are at an organisation for more than two years you would be inside IR35. Several cases have shown this not to be true. You’re not a contractor one day and then an employee the next when you are doing no different a job.
The tribunal decided that Paul did not get appraisals and was not part of he disciplinary process that staff members were. So, he wasn’t part and parcel of the organisation.
The tribunal decided that there was financial risk to Paul as his contract renewals depended on the success and future success of the programme. Employees don’t have that financial risk. This is very good news for contractors everywhere as their renewals depend on their performance. This is not something that permanent employees have to worry about.
Mutuality of Obligation (MOO)
Surprisingly, the tax tribunal believed Mutuality of Obligation to be of little importance. This was always considered one of the three main pillars of IR35 factors along with Supervision, Direction and Control and the Right of Substitution.
However, they still gave this one to Paul as there wasn’t sufficient evidence of Mutuality of Obligation.
Supervision, Direction and Control
Although Talksport controlled the ‘where’ and ‘when’ the work should be done the ‘how’ was considered far more important. The tribunal considered that Paul Hhakwsbee had a great deal of editorial autonomy on how the work should be done.
This is very important for contractors everywhere us usually the client company decides where and when the work should be done.
If how the work should be done is more important than where and when then that is a big win for contractors.
The Right of Substitution
There was no right of substitution in Paul Hawksbee’s contracts with Talksport. However, this was considered by the tax tribunal to be completely neutral as TalkSport were paying for the unique expertise of Paul Hawksbee.
This is very important for freelancers who have unique skills where a substitute could not replicate their work. This will no longer mean that those freelancers will be at a disadvantage when it comes to IR35. That makes a lot of sense.
Overwhelming IR35 Tax Tribunal Win for Contractors
So, this tribunal case represents an overwhelming victory for contractors everywhere. Someone somewhere needs to look at the amount of time and money that HMRC are wasting on losing IR35 tax tribunal cases.
Someone should also look at whether HMRC are the right people to be building and amending what is considered the definitive test for IR35, i.e. the Check Employment Status for Tax test.
However, it looks as if they are a law unto themselves. This appears to be gifted to them by Cameron, Osborne, May and Hammond.
Is HMRC Competent Enough to Create Definitive IR35 Test?
Dave Chaplin, anti-IR35 campaigner and owner of ContractorCalculator.co.uk now questions HMRC’s ability to create the definitive IR35 online tool Check Employment Status for TAX (CEST). He claims HMRC don’t have a good enough knowledge of IR35 to be able to have them create the definitive IR35 tool.
Said Dave ” it again raises questions over HMRC’s ability to interpret and police IR35, as well as the Check Employment Status for Tax tool.
“This tribunal granted significant weight to a multitude of factors that aren’t even considered by CEST, while the ruling means that HMRC has now only fully won one of the last 14 cases to go to tribunal.”
If HMRC were a football team they would be in deep relegation trouble with just 4 points from their last 14 games. That’s despite being able to hand pick which opponents ‘to play’.
To keep yourself outside IR35 check out the major and minor IR35 Factors
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