Victory for IR35 refund claim

An IT freelancer has successfully reclaimed the tax he paid under IR35 from the Inland Revenue, despite originally 'ticking the box' to say he was caught, which could have significant implications for small businesses and freelancers who have paid IR35 tax in the past.

This is the first successful retrospective IR35 tax claim for Qdos Consulting, who recently set up 'Out of the Box' to help freelancers reclaim IR35 tax which might have been paid unnecessarily.

In the early days of IR35, many freelancers and small businesses paid IR35 due to the uncertainty surrounding the implementation of the legislation. Since then, the situation has clarified and possibly many freelancers could now have a strong case to seek to have that payment refunded.

Ticked the box

Keith Preece, Senior Tax Consultant at Qdos, said: "After six months of claiming, writing, complaining to Area, complaining to Region, and tearing of hair, the Revenue has finally accepted our retrospective claim, on behalf of an IT contractor, that one of his engagements falls outside of IR35.

"This is despite the fact that the contractor concerned originally ticked the box on the form P35 to say he was caught by IR35 and paid Income Tax and NIC under the "deemed payment" provisions.

"This is a victory in two parts. Firstly, the Revenue has accepted that a retrospective claim to be outside of IR35 is permissible under the Taxes Acts. Secondly, despite the fact that we had to wait while the Revenue indulged in some tedious buck passing, eventually they appear to have accepted the revised IR35 position on the basis of the information given in the initial claim, without taking up our invitation to make further enquiries.

This could now open the gates for more freelancers to have their situation reviewed retrospectively.