Contractor rules are 'too vague', says Redston

Rules on contractors’ tax affairs are still too vague, an expert has warned.

Following last week’s Dragonfly case, which again tested the controversial IR35 rules, Anne Redston, professor of tax law at Kings College, London, said areas around so-called ‘substitution’ clauses are still unclear.

The right to substitute an alternative if a contractor cannot do the work required is seen as a key litmus test as to whether or not the contractor is self-employed.

IT consultancy Dragonfly failed to overturn a tax demand for £99,000, since its contractual absolute right to substitution was not matched by the reality of
the situation.

Redston said the case highlighted that a more limited right to substitute an alternative would not get contractors past IR35 rules.

‘They’re all cases in the grey area, but each time one of these cases goes to court it draws the line more firmly in the sand for freelancers,’ Redston said.

Redston said while the outcome of the Dragonfly case came as a disappointment to the freelance fraternity, it wasn’t a surprise.

‘This judge hasn’t changed anything. It’s shone a much brighter light on substitution,’ she said.