It has been six years since the last IR35 case was taken to Tax Tribunal, however Qdos broke that trend last week when we decided to take our first case for many years to Tribunal.
The circumstances behind the case were strong in terms of IR35, however as in all IR35 cases much of the decision will rest on the evidence given by the contractor's end client regarding the actual day-to-day working arrangements, which in this case, was very supportive of the contractor.
The contractual terms were considered however, and referred to many times throughout the hearing. The upper level contract, between the agency and end client was also commented upon, because it contained clauses particularly detrimental to the contractor. The contractor, of course, had never had sight of the upper level agreement as is commonly the case.
What I found to be unusual in this case was that HMRC chose not to defend the case themselves and appointed legal counsel to put forward their arguments. This made for a much more intimidating experience as a large portion of the tribunal resulted in the contractor being grilled by legal counsel whose questioning method contained a number of leading questions, or rather statements, which the contractor could very easily and unwittingly agree to. The questions posed were of a very broad nature but requiring ‘yes’ or ‘no’ responses.
HMRC were present at the tribunal and made their presence felt by constantly passing notes to the legal counsellors, presumably containing further points they wanted to stress.
The Judge appeared to be somewhat sympathetic however, and the questions asked demonstrated a keenness to understand exactly how the contractor operated. Full details of the tribunal cannot be provided at this stage as the Judge reserved their opinion of the case – but must provide a determination within a month of the date of the hearing.
Any contractors wishing to go it alone to defend themselves at a Tax Tribunal should be prepared for what will undoubtedly be a challenging experience.
Interesting enough the latest IR35 forum minutes indicated that HMRC are looking to litigate further enquiries in the future so we should expect to see many more IR35 enquiries appear before a Tax Tribunal.
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