IR35 - Commissioners or not?

Many will sympathise with former freelancer, Bill Hood, following his recent defeat by the Inland Revenue at a Special Commissioners' IR35 status case and we all wish him well if he appeals. We are often asked whether or not we should take cases to the Special Commissioners and without knowing the full facts here it is difficult to comment on this specific case or what we would have recommended. The following article takes a look at the general situation and some issues which should be considered when deciding whether to 'go to the Commissioners or not'.

Last resort

Whether you opt for the General or Special Commissioners it must be done as a last resort. A Commissioners' meeting is the first rung of what can be an extremely expensive ladder. The decision can be appealed by either party which may see the case in the High Court, the Court of Appeal and eventually the House of Lords. This process is very costly, time consuming, stressful and final.

What is the significance of a Special Commissioners' hearing? Whilst it gives some clarity and guidance it does not set a legal precedent. It can become public and a failed case invariably prejudices other individuals who are trying to win their cases on similar issues. More significantly the hearing is an 'all or nothing' scenario and voids any opportunity to agree a compromise which may be the best option in extremely weak cases.

Witnesses

There are also commercial factors to consider. The Special Commissioners would be expected to allow the Revenue to summon witnesses, who would be representatives of the end clients, with a view to strengthening the Revenue's case.

The potential dangers of this situation are obvious and may lead to contracts not being renewed. Witnesses may feel pressurised into supporting the Revenue's case so as not to jeopardize their own standing with the Revenue. The cross examination of witnesses is always dangerous, unless you are represented by the most skilled and costly of barristers. Supporting Special Commissioners' cases could have a knock on effect with the level of insurance premiums which will affect everyone.

The announcement that the Bill Hood case failed at the Special Commissioners leaves a sour taste and we have every sympathy with his plight. This case does however confirm our long-held view that case law strategy is not the best form of defence in the fight against IR35.

Contractors and freelancers should be educated and protected to maintain their status. We should endeavour to work with agencies and end clients to get working practices and contracts right. A number of cases previously brought before the Commissioners have been lost and only hinder not help the situation.

Steve Greenwell

Qdos Consulting Ltd