IR35 win when Revenue settle

Bauer & Cottrell have won an IR35 investigation case just 10 weeks after being appointed. Kate Cottrell started the case on July 28, 2003 and the Revenue phoned through the good news on October 3, 2003.

The case concerned an IT Contractor (Joe Bloggs) who has worked through his own limited company since 1995. He contracted through an agency and has been at the same "end user" for over three years. The Revenue carried out an Employer Compliance Review in June and were disappointed that Joe was not present so wanted to call again to discuss "the assignments you worked on during 2000/01, 2001/02 and 2002/03". At this point Joe sought advice. An initial analysis of his situation revealed the following:

• The contract between the agency and JB Ltd was a complete fail being a contract to supply a named consultant with references to "duties", "accept the direction, supervision and instruction of any responsible person in the clients" and the substitution clause referred to "proposed" and "permitted substitutes" and there was also a specific clause stating effectively that the agency did not have to even consider or process any request to substitute. The contract schedule stated the length of the contract was for "initially" 12 weeks, which has implications for MOO.
  
• Other factors in support of Joe genuinely being in business on his own account were thin on the ground.

After a thorough investigation of all the facts and terms and conditions it was clear that Joe worked on a series of new products or to add a new facility to an existing product. It was then possible to show these as a series of specific projects. Joe occasionally worked from home and had evidence to support spending on capital equipment and investment in software and reference material. The end-user signed a confirmation of arrangements letter.

A comprehensive technical argument was then put to the Revenue.

The argument covered every status issue and this together with the confirmation from the end-user ensured that the Revenue had "no further questions to ask".

Yes this was an easy case in that the Revenue settled on the strength of one letter. The case shows the need to seek professional advice at an early stage and from a firm used to working these cases. The fact that Kate has won cases against this particular Inspector before may have had some influence!

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Sarah Bauer and Kate Cottrell are ex Revenue and have an unbeaten track record in tax/IR35 status in the UK. They have won every single case they have worked without the need to go as far as appeal before the Tax Commissioners.