Public Sector contractor wins IR35 case

18th June 2018

HMRC have lost a second IR35 case this year, and their second case against the same contractor, putting into doubt their own understanding of the IR35 rules. Ian Wells, director of personal service company Jensal Software Limited provided his services to the Department of Work and Pensions via a recruitment agency during 2012 and 2013.

HMRC would have been keen to win a case against a public sector contractor to bolster the IR35 reforms that began on 1 April 2017. However, the tribunal judge found several factors that meant the contract was outside IR35.

Mr Wells was not subject to the level of control that would constitute a contract of employment.

A clause in the contract allowed a substitute to be provided, and although not utilised, meant the balance was shifted away from employment. In fact, Mr Wells admitted he had requested the addition of such a clause which HMRC insisted proved the clause was a sham. Interestingly, the judge reasoned that inserting a clause did not negate the right to use it and rely on it.

HMRC generally view all public sector contracts to have Mutuality of Obligation – an obligation on both parties to provide and accept work. Judge Jennifer Dean decided there was not enough of an obligation to demonstrate a contract of employment.

 With HMRC currently consulting on private sector contractors, their decision to pursue this case casts doubt over their ability to recognise whether a contractor belongs inside or outside IR35.

 

 



 
Other items in Blogs
 
Thomas Nicholls
15th June 2021 Tax on Cryptocurrency does not have to be cryptic

Within the last 10 years the cryptocurrency scene has exploded from the first decentralised cryptocurrency, Bitcoin, being created back in 2009 to now more than 4,000 different cryptocurrencies being in existence with a total market cap value of over £1trillion.   This has led to the creation of the Cryptoassets Taskforce which was announced back…

Read More »

Jaimie King
14th June 2021 Deferred tax rate to increase

Deferred tax is a provision on the balance sheet for timing differences in tax and accounting treatment of certain items, and is measured at the rate of tax that the differences are expected to reverse in the future.   In recent years, deferred tax has been measured at the current corporation tax rate of 19%,…

Read More »

Scott Butcher
9th June 2021 Paying VAT by Direct Debit – check your HMRC records

HMRC are in the process of moving VAT records for non-MTD registered traders from their old database to a new one.   Due to banking requirements if HMRC does not hold a valid e-mail address for a trader, when the data is transferred to the new database, any existing direct debit mandate will be cancelled.…

Read More »

James Cater
4th June 2021 Delivering Rural Investment for Vital Employment

  There is a new support programme, DRIVE, that can result in grants of up to 40% of total project costs for businesses in Norfolk and Suffolk that wish to undertake projects that primarily create new employment within the rural economy. Grants can be up to 40% of total project costs with a minimum grant…

Read More »

Steven Denton
3rd June 2021 National Insurance holiday for employers hiring veterans

Following an announcement by the government in 2020, from April 2021 employers hiring former members of the UK armed forces will be exempted from any NI contributions liability on the veteran’s salary up to the Upper Secondary Threshold (UST) in the first twelve months of their employment. However, under current guidelines relief for the 2021-22…

Read More »

Stephen Malkin
28th May 2021 Xero – Multi-factor Authentication

  Do you use Xero?   If you do, then multi-factor authentication when logging in will become compulsory after 2 July 2021.  From 1 June you will be prompted to set this up but can defer up until 2 July 2021.   Having a second layer of security is designed to prevent anyone but you…

Read More »