First public sector IR35 case since reform awaits verdict
Centering on a contractor and his public sector engagement, the case was heard in October 2017 – just six months after the updated off-payroll rules took effect.
But because the engagement under enquiry was carried out by the contractor and his company in the 2012-13 tax year, it is the previous set of rules that he was assessed under.
“It’s difficult to say why the contractor was taken up for enquiry,” says Qdos Contractor, which defended the case, after HMRC took the unusual step of fighting the PSC using a barrister.
“But it might have been because the end-client was a public sector body. [Or it might have been] because the tax at stake was fairly substantial.”
Further details of the case are under wraps, ahead of its imminent verdict, but an outline of the factors for and against the 20-year-old PSC retaining its outside IR35 status has been provided to ContractorUK today by Qdos’ head of tax Andy Vessey.
However, some say the additional specifics don’t need to be known to already realise that the judgment is likely to have far-reaching implications for the entire contracting industry.
“This is an extremely important case for everyone, being the first IR35 case for seven years and it involves the public sector,” says Kate Cottrell of IR35 advisory Bauer & Cottrell.
“Imagine that you are HMRC; and are planning to roll out the off-payroll rules to the private sector and you've have been making the case that the roll out in the public sector has been a resounding success, whilst ignoring any contrary evidence -- then you would throw everything you could at this case, which explains why HMRC chose to be represented by a barrister. This is certainly not a case that HMRC would care to lose in these circumstances.”
The former tax inspector added that although the case was not due to create precedent, a win for the taxpayer would not only be positive for him, individually, it “could also be very helpful to everyone affected by IR35.”
“And,” she said, “it would certainly be useful when responding to the imminent consultation on the rollout of the new rules for the private sector. Fingers crossed.”