Contractor defeats taxman in £240k IR35 case


HMRC suffers blow as contractor successfully appeals IR35 ruling

An IT contractor has beaten HMRC in an IR35 Tribunal carrying £243,324 in liability, to inflict yet another defeat on the tax office. 

After an investigation lasting five years, it was decided on 29th October that IT consultant, Richard Alcock, had successfully appealed his IR35 case, meaning he will not need to pay this eye-watering sum to HMRC.

This was after the tax office had claimed Mr Alcock should have been operating inside IR35 on a number of engagements held between 2010 and 2015, whilst working with Accenture and the Department of Workplace and Pensions (DWP). 

Mutuality of Obligation pivotal

Mr Alcock’s appeal was said to have been won largely on the fact that Mutuality of Obligation (MoO) was not seen to be present. MoO is the obligation that a business has to provide paid work and the obligation that an individual has to accept it. In an outside IR35 engagement, it’s important that MoO isn’t present – as was decided in Mr Alcock’s case.

Chris Leslie of Tax Networks, who represented Mr Alcock, put this into context: “He agreed the work to be done, and only that work to be done. Then he got to work, and worked very hard indeed to meet the outcome goals. And then he billed only for the work done. His contract specifically states that he can only charge for work actually completed. And to top it off, in one instance they did cut the project short at a moment’s notice, and he was not paid.”

Final nail in CEST’s coffin?

Due to the fact that MoO didn’t exist in Mr Alcock’s contracts, the reliability of HMRC’s IR35 tool, CEST, has been called into question yet again. This is because MoO – one of the key IR35 status tests – isn’t included in CEST, with the tool working off the basis that it’s present in all engagements. 

Contractor Calculator’s Dave Chaplin, who also worked on Mr Alcock’s case, said: “What’s more striking is the fact that the case was won primarily on Mutuality of Obligation, which should surely now be the final nail in the coffin for CEST, HMRC’s online assessment tool – because this essential employment status test is still missing from the tool.”

HMRC’s “bullying” resulted in “immense pressure” 

Speaking about his experience at the hands of HMRC, Mr Alcock criticised the taxman for placing “immense pressure” on him and his family, before going on to say: “I cannot understand why HMRC pursues contractors so much. Their bullying tactics have been extremely stressful, made all the more difficult to bear since the verdict has ruled in my favour. I should never have had to go through this in the first instance.”

Having been “relentlessly pursued by HMRC over the last few years in the run up to the verdict”, Mr Alcock has now returned to permanent employment – a move which Contractor Calculator said means he “ironically generates less tax for the Treasury than he did before.”

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