Five IR35 wins save contractors £300,000

Contractor specialists, Bauer & Cottrell, would like to share some summer cheer with contractors having won five IR35 cases and saving contractors more than £300,000 in the last ten days.

Kate Cottrell of Bauer and Cottrell writes:

Danny Batey, who joined us in January as Senior Consultant, has won five IR35 cases in the last 10 days. The cases were all new to Bauer & Cottrell and Danny - although most had been worked by the contractors' advisors for the previous 3 or 4 years.

Kate Cottrell All these cases concern end clients that are large financial institutions which seems to be a favourite target for HMRC.

Three cases concerned the same end client and all three were taken on following Section 8 NIC decisions and Regulation 80 determinations. The cases were about to proceed to the Special Commissioners. Danny reviewed the cases and put technical arguments based upon up-to-date case law precedent to HMRC who has now agreed at this late stage that IR35 does not apply.

One of the contractors is currently contracting elsewhere, one is still contracting at the same end client and the most interesting one became an employee of the end client during the investigation – a sort of backwards Friday to Monday case!

Dormant companies

The interesting point in the other two cases is that having a dormant company does not protect you from Revenue investigations. One of the contractors' companies was dormant for two years before the investigation started. Despite this HMRC continued to pursue the case for more than two years until Bauer & Cottrell was appointed. The previous advisor simply advised our client to pay up under IR35 or seek specialist advice.

In the other case, we have a company that became dormant during the investigation as the contractor moved to an Umbrella company. Again HMRC continued to pursue the case for some three years.

In all the cases, the contracts were very weak and if they had been reviewed would have failed IR35.

The message here is that it is essential to seek specialist advice at an early stage from a firm used to dealing with IR35 cases, not least to save unnecessary costs and stress.

It is also clear that leaving a company dormant does not necessarily make IR35 go away. Our five clients are delighted and they can now relax and enjoy the rest of the summer sunshine.

Kate Cottrell www.bauerandcottrell