TaxPersonal TaxRevenue gives way on IR35 claim

Revenue gives way on IR35 claim

A contractor has avoided the impact of IR35 despite having almost exactly the same circumstances as an earlier taxpayer who was forced to pay over 50% of his company turnover in tax under the same legislation.

Link: IR35 Special area

The contractor was the subject of a PAYE compliance investigation launched by the Revenue in 2002.

The case involved virtually the same facts as those that applied to Gordon Stutchbury of Synaptek, who earlier this year failed in his IR35 High Court appeal.

John Whiting, tax partner at Big Four firm PricewaterhouseCoopers, said the decision by the Revenue status officer not to apply IR35 was ‘a useful few straws in the wind’ and demonstrates that the Inland Revenue ‘is persuadable’.

‘It shows that your case is distinguishable from cases that have gone before,’ he said.

Michael Brophy, senior consultant at Lawspeed, the specialist adviser in the case, said the key lesson was that it pays to get quality representation from the outset. ‘It is about paying attention to detail,’ he said. ‘The case highlights the fact that the Inland Revenue is quite easy to beat.’

One of the key issues of the case is that the contractor had worked on a project rather than as part of a team.

Gordon Stutchbury, an ex-policeman from Sunderland, lost his High Court appeal because the Revenue labelled him a ‘disguised employee’ of computer services giant EDS, and so subject to IR35.

Simon Griffiths, chairman of the Professional Contractors Group, agreed with Brophy, saying that ‘appropriate professional advice at the earliest possible stage may have a crucial effect on the result’.

Email David_Rae@vnu.co.uk.

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