Special Commissioners' guidance on IR35 appeals

The Special Commissioners recently placed guidance on their web site about IR35 appeals. This is a supplement to their existing guidance on appeals and other appearances before the Special Commissioners.

For a copy see here:

IR35 appeal guidance

It gives some very brief background to IR35. It also includes references to the legislation, which are now out of date following the tax law rewrite under which the old IR35 tax legislation, that was first set out in Schedule 12 Finance Act 2000 (for income tax), is now set out in Chapter 8 of the Income Tax (Earnings and Pensions) Act 2003 (‘ITEP’).

It makes the point that an IR35 appeal is slightly unusual in that the appeal will be in the name of the intermediary but the people it most affects are the worker and the end client.

It then goes on to set out what the appellant (usually the intermediary) has to show to win their appeal against the Revenue’s decision that the worker would have been an employee of the client had the intermediary not existed. This list of 16 points is merely a recitation of the main status issues, as established under case law. It covers the following:

(1) how the payments for the work are calculated; whether this is by the volume of work done or by reference to the number of hours worked;

(2) whether the worker gets paid for sickness and holidays and what the pension arrangements are;

(3) whether the worker's absences have to be approved in advance;

(4) whether the client can control what, where, when and how the work is to be done;

(5) whether the worker must do the work personally or whether he can provide a substitute;

(6) whether the worker provides his own tools and equipment;

(7) whether the worker is part and parcel of the client's organisation;

(8) whether the worker occupies a post (such as General Manager or Secretary) in the client’s organisation;

(9) whether the worker has a job title in the client’s organisation;

(10) whether the worker works continuously for the client or whether the worker has a series of engagements;

(11) whether the worker hires his own employees;

(12) whether the client is obliged to offer work and whether the worker is obliged to do the work;

(13) whether the worker works, or can work, for other clients;

(14) whether, and under what conditions, the contract can be terminated by the client;

(15) whether the worker assumes any financial risk; and

(16) whether the worker has an opportunity to make a profit on his own account.

The guidance also briefly covers such issues as what documents will be needed, what oral evidence is needed and getting evidence from the client.

Omissions

There are some surprising omissions from this guidance.

Bearing in mind that the first IR35 appeal before the Special Commissioners was an embarrassingly naive performance by a worker who represented himself and totally failed to cite any case law in support of his case (Battersby v Campbell 2001) it is surprising that the guidance makes no reference whatsoever to the need to provide case law in support of your main arguments.

While the guidance notes the importance of obtaining written and oral evidence from the client it is also surprising that the guidance makes no mention at all of the possibility that the intermediary may not only have a contract with the client but also with an agent.

Overall, therefore, the guidance seems to go only part way to preparing a tax-payer for the task of presenting their IR35 appeal before the Special Commissioners. For any UKTECH readers we can only emphasise the risks in representing yourself. We can only stress the great benefit of using an experienced accountant, tax expert or lawyer and the need to have some form of professional fees insurance to cover the costs of handling an appeal.