Contractor wins IR35 case

An IT contractor has won an IR35 case after a three-year battle with HM Revenue and Customs (HMRC).

The Professional Contractors Group and accountancy firm Qdos supported the professional after the Revenue scrutinised past contracts dating back to 2000.

The anonymous victor paid tribute to both professional groups, saying they were instrumental in proving that contrary to Revenue suspicion, contracts since 2000 were in fact outside IR35.

A PAYE compliance review triggered the IR35 case that has now been thrown out because the contractor used the 'control' test to prove he was not an employee.

"I have won my long-running IR35 battle with HMRC, thanks to PCG and Qdos, without whose help I would have thrown in the towel some time ago. It has taken over three years," said the ex-PCG member, writing in the Group's recent newsletter.

"To cut a long story short, they [HMRC] said that I was caught under the MOO and substitution factors - even though other contractors, with the same agent, had sent substitutes to this end client.

"Control was, however, the deciding factor; they said that I did not come under sufficient control for the hypothetical contract to be one of employment."

PCG has handled over 1,000 investigations where the contractor has been found to be outside IR35, compared to just three, which found the contractor to be inside the ambiguous tax rule.

John Kell, political researcher at the PCG, said such an impressive record "shows no sign of abating."

He told Contractor UK:" Investigations typically last around two years: the amount of stress and uncertainty that has been caused to contractors who have done nothing wrong, not to mention the waste of HMRC's resources in pursuing all these fruitless cases, is plainly unacceptable in a self-assessment system."

The triumphant contractor said he was optimistic his case would offer other temporary professionals suffering equally prolonged cases "a bit of hope."

Kell concluded the victory for the contract community simply, "reinforces PCG's argument that, as well as being fundamentally unfair, IR35 is an unworkably cumbersome measure."

Thursday 3rd November 2005