Alan Parry's IR35 case 'recrowns the contract as king in status disputes'

The “contract is king” for any contractor trying to avoid ‘an Alan Parry’ -- the Sky Sports football commentator who has picked up a red card on IR35 status.

This advice on how to dodge getting successfully tackled by HMRC, as the soccer pundit was given the FTT has come down on the Revenue’s side, comes from ReLegal Consulting.

“The First-Tier Tribunal held that Mr Parry was not in business on his own account and that the dominant feature of the hypothetical contract was personal service,” the legal firm says.

“There are likely to be more [IR35] wins for HMRC, because the courts are shining a light on the written terms of the agreement.”

‘Key area’

In an update on Friday, law firm Chartergates said the judgment against Alan Parry Productions Ltd shows that the contractual terms agreed between the parties remain a “key area” when it comes to determination.

“This is the starting point for all IR35 cases and employment status disputes so it is important to ensure that any written terms agreed between the parties accurately reflect the relationship between the parties”.

The update further advises that the relationship between PSC and client involves day-to-day arrangements, but also any potential “flashpoints” that may arise during the agreement.

‘Postulating circumstances’

Chartergates was quoting FTT judge Beare, who effectively told Mr Parry that to determine IR35 status, courts must consider “postulating circumstances where one… [party stands] on its rights as set out in the written contract against the wishes of the other party, and then to consider what might have occurred.”

But should a contract be worded fairly towards the contractor, whereby it respects their commercial status and position, then scrutiny of the small print shouldn’t necessarily be feared.

“The good news is that if the courts are having to look at the written terms… [any] right of substitution clause also has to be considered,” says ReLegal’s boss Rebecca Seeley Harris.

‘Contract is king’

“Although, in Parry's case,” continued the tax lawyer, “the tribunal decided that his right to propose a substitute was valid but, so was BSkyB's right to reject the proposed substitute. Again, the contract is king -- long live the contract!”

Louise Rayner, managing director of NumberMill has reflected on what she pointed out is yet “another” host for Sky losing on IR35.

The accountant went on: “The key takeaway here is that while Sky’s contract was standard, the contracts do not always relate to the work undertaken in practice.”

‘Terms cannot simply be set aside’

However, courts are aware that engagers will include terms to protect themselves in the event of a dispute, “so contractual terms” – even if not enforced daily or part of to the day-to-day “cannot simply be set aside”, warns Chartergates.

The law firm added: “A party may well seek to rely on certain agreed terms in the event of any number of different flashpoints.

“[And while the Parry case] does not break any new ground with regard to the principles of IR35, it does give us an insight into how recent high-profile cases in the Court of Appeal may be utilised by HMRC in upcoming cases, and how an FTT may consider approaching the evidence and argument put forward by both parties.”

‘Your contract is a true reflection of the work you are expected to perform’

Taking to LinkedIn to advise her connections about the Parry case, NumberMill’s Ms Rayner recommended: “Make sure that your contract is a true reflection of the work you are expected to do and ensure that any additional requirements are included within it.

“[And furthermore] make sure that there is written evidence to support your case in the event of any future potential enquiry.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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