IR35 case study: 'Absolutely fabulous' IR35 win

Freelancer specialists, Bauer & Cottrell, outline a recent IR35 case study, where the Revenue ignored the contracts and went straight to the end client.

Bauer & Cottrell explains:

Sally Howitt, an IT Consultant and director of AbFab Consultancy Ltd, is celebrating her IR35 victory after having been subject to an IR35 investigation by the Revenue for almost three years.

Sally's case began in November 2001 with an Employer Compliance Review. Her case was initially handled by her accountant and passed to an IR35 expert firm in November 2002. From then until late September 2004 numerous letters were exchanged with the Revenue and complaints were made about the Officer handling the case.

Sally said: "I felt that my case was going nowhere and that it was being pushed by the firm to go to a Commissioners hearing. I did not want this for a number of reasons. Firstly I have always been assured that I have a strong case, secondly I have seen several cases recently where the Revenue have won at the Commissioners and also I was looking at costs for representation at such a hearing of some £4,500".

Sally's investigation started with two contracts at stake up to 31 August 2001. The contracts were through two different agencies to two different end clients. Sally tendered for the first contract and the second contract was competed for in a number of different countries all over Europe.

Although the contracts in themselves were clearly outside IR35 the Revenue chose to ignore them and go straight to the end clients to support a written opinion that IR35 applied and a request for some £40,000.

In April 2004 Sally's case turned from bad to worse when the Revenue asked for all subsequent contracts from August 2001 to April 2004 and advised that these too were to be subject to investigation under IR35.

Bauer & Cottrell were appointed in September 2004 and Kate Cottrell began discussions with the Inland Revenue. Written agreement that IR35 did not apply was obtained on 26 October 2004.

Sally is understandably delighted and greatly relieved from the stress of an investigation that has lasted for almost three years.

Sally said: "My message to anyone finding themselves in this situation is not to give in. I have always run a professional business and believed that I was outside IR35. It has been a very long, stressful hard slog but with the right advice my case is now won and I can put this behind me."