Revenue drops IT contractor's IR35 case

HM Revenue & Customs has finally admitted defeat in an IR35 case after subjecting an IT contractor to gruelling interrogation-style questioning for five years.



Despite significant evidence of being in business of his own account and a definite lack of control as to how he worked, HMRC begun probing the freelance in late 2004.



But the PCG, which declared the victory, said that as with many IT contractors, HMRC failed to come close to proving the worker was akin to an employee and owed taxes accordingly.



Tax officials did not understand what the contractor was doing, how he worked, what his many projects were or how he interacted with the client company, the group said.



Seeming to underline the Revenue's challenge, the PCG said the contractor, a member of the group, had closed his company, leaving "no way of paying the liability."



The case was also subject to delays on the part of HMRC, whose officials, in one instance, were said to have taken up to five months to respond to the contractor's adviser.



In June this year, the case went to independent review, which saw the contractor's new adviser, Accountax, compile a six-page report on how the worker supplied his services.



The report covered how the contractor's company interacted with the main client, and cited the fundamental failings in fact-finding and failure to apply the correct tests by HMRC.



Last week, and having received the detailed account of the contractor's working realties, the Revenue contacted Accountax to say it was dropping the case.



"This case demonstrates the fundamental importance in arguing IR35 enquiries forcefully and applying the pressure on HMRC," the Professional Contractors Group (PCG) said on its website.



"Over four years worth of distress and painstaking delays for the PCG member neatly tidied up within 9 months, simply because the pressure was put on the inspector to reply to all points, on time."



For the contractor's part, he said he felt his adviser's efforts in recent months had forced the Revenue to withdraw, and added he was "delighted the nightmare was over".