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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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Adrian Marlowe of Lawspeed says despite the Revenue winning the first few IR35 cases at the Special Commissioners, case law will eventually come to the aid of the contractor. In the two IR35 Special Commissioner’s cases to date the Revenue has been successful in both, and we have also been made aware of two other General Commissioner’s cases where the Revenue were also successful – some where the contractor was professionally represented and others where he chose to ‘go it alone’. Based on these results there are reports from contractors that the outlook is bleak. To counter this we would like to share some of our experiences to help put this into perspective. Firstly it is useful to take into account the Revenue’s earlier figures (with a grain of salt) regarding the pass/fail rate of contracts submitted for review. The Revenue previously indicated that around 50% of contracts had passed. In the 20 cases that we have been involved in (95% through agencies & 5% direct) all have passed the Revenue’s contract review service either on initial submission or on appeal. The cases we have been involved in do not fit with the Revenue’s typical criteria of a pass arrangement (i.e. fixed price contracts of less than one month) but have been arrangements (mostly in IT but also engineering) where the contractor has been engaged with the same client for periods ranging from 6 weeks up to five years and is paid an hourly or daily rate to perform a range of standard consultancy services mostly on the client’s site using the client’s equipment. Typical engagements are for services such as software design, development, implementation, analyst programming, test planning, system migration and integration, project management, database design and development, engineering consultancy and web design and development. Another point is that although it has been a slow process, many Revenue inspectors now appear to be more aware of the relevant issues. One of the key factors in achieving a positive result is ensuring that the inspector understands the work that the contractor is performing and being able to differentiate a contractor engaged to complete a particular project from a standard employee. When dealing with the IR, it is important to try and agree as much as possible and then move on to the contentious issues. So with the proper case law arguments issues like timesheets, hourly rates, working on client sites, etc. can usually be clarified and then put to one side as neutral or only minor indicators. It is very important to ensure that the engagements are project-based and to get this message across to the inspector. Then it is a case of proving, as a matter of fact and contract, how the key issues such as control, substitution, mutuality, financial risk and ‘in business on your own account’ are evidenced in the arrangements. It is usually the presentation of the arguments on these factors that results in a positive outcome. So although the Revenue appears to be succeeding at the Commissioners there are many cases that they are not taking all the way to the Commissioners where the contractor has received the right advice and representation. Given the weight of case law available in support of many contractors being found outside IR35, we can only assume that results at the Commissioners will start going in favour of contractors in the near future if the right arguments are put forward but the Revenue appear to be choosing which battles to fight very carefully. We hope this helps paint a slightly more positive picture to contractors and their advisors than the reported case results might otherwise suggest. Adrian Marlowe is Managing Director of Lawspeed, a niche legal consultancy specialising in IR35, contract and employment law for those operating in the in the IT and contracting industries. This article is for general guidance only and is not a substitute for professional advice where specific circumstances can be considered. Whereas the greatest of care is taken in providing this information, neither Adrian Marlowe nor Lawspeed can accept any liability for any action taken or not taken in reliance upon the information provided in this article. Mar 26, 2002 Email this article Printer friendly page Previous Page
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