‘Shirty’ IR35 adviser of former tennis ace Barry Cowan ‘serves as a warning to contractors approached by HMRC’

An IR35 adviser to ex-tennis pro Barry Cowan “serves” as a reminder to meet tax enquiry procedures, not ‘play your own game,’ nor be “shirty” with HMRC.

Named by the UT only as a “Mr Leslie,” the adviser fired off 23 points to HMRC disagreeing with it that Cowan was inside IR35, but not one of the points explicitly requested a review.

HMRC made the IR35-caught determination on contracts Cowan held with Sky Sports as a tennis pundit between the 2013/14 and 2018/19 tax years.

'View of the matter'

Mr Leslie, on behalf of Cowan, knocked back HMRC’s determination (dated June 18th 2021), on July 9th 2023 in the shape of the 23-point volley.

No direct reply emerged but -- as a review of the inside IR35 decision was not requested -- HMRC emailed on Dec 8th to say its “view “of Cowan’s IR35 status remained the same.

Precisely 23 minutes after HMRC’s “view of the matter” email was sent, a clearly rattled Mr Leslie, noted by the UT to be a “chartered accountant,” replied:

"You say your view has not changed, but you have failed to respond at all to any of the points we have raised in our email dated 9/7/21.

“So is this how you intend matters to progress, that is, you simply ignore the points we have raised and carry on regardless?

“No wonder we have raised a complaint in this case.

“And if this is the best you can do, we are raising another complaint as this response is completely unacceptable.”

The Upper Tribunal (UT) says Leslie concluded by telling HMRC: “Please reply by 22 January 2022.”

Rather than setting a deadline for HMRC, experts yesterday told ContractorUK that Cowan’s adviser should have requested a review.

'30-day statutory time limit elapsed'

HMRC then moved to settlement, which Leslie knocked back, only for the next meaningful HMRC communication to be it saying the review window was now closed.

In other words (and as HMRC told Cowan and his legal team in writing on Jan 22), the “30-day statutory time limit” to review its IR35 decision had elapsed.

As a result, the appeal was now treated as “settled”, Cowan, 49, was told.

'Full of holes and errors'

Not seeming to grasp that HMRC deemed the IR35 dispute concluded and crucially, concluded in its favour, Leslie went on the offensive again: 

“There is no way the matter is going to be settled in this way. Your 'opinion' dated 18/6/21 was full of holes and errors.

“Plus it also seemed to rely on information that you purport to have come from Sky, however, as explained, we have not seen this correspondence.

“You are well aware of our position and I sent you a very long e-mail on 8/7/21, so am still awaiting your detailed response, rather than your very short letter dated 9/12/21 which I received by e-mail on 8/12/21 and to which I responded the same day, but have received nothing further from you until today."

'Frustrated... indignation'

Finally seeming to realise the error of his ways, Leslie eventually lodged an appeal on March 9th -- 62 days too late according to HMRC.

Cowan’s late application to appeal, made to the FTT, was analysed for this website by Qdos in May 2023.

Then, the IR35 contract review firm emphasised the importance of abiding by HMRC’s enquiry procedures, including the 30-day IR35 enquiry letter deadline.

But going before the FTT in April 2023 to try to apply for a late appeal, Cowan, represented at the hearing by Simon Browne KC, was unsuccessful.

First-Tier Tribunal Judge Amanda Brown KC spoke of Cowan’s prior representative, Mr Leslie, as being “increasingly frustrated” and showing “indignation” to HMRC’s conduct.

'Competent professional'

Yet Judge Brown added: “The representatives in this case…should have been…aware of the statutory time limit in which to request a review or notify an appeal. 

“As such there is no sensible basis to contend that they were unaware that it was running from the letter dated 9 December 2021.  

“Acting prudently, a competent professional could have been expected to have protected the applicant’s [Cowan’s] position by formally asking for an internal review even were the view held that the [HMRC] view of the matter was inadequate.”

'Serious and significant delay'

Despite Judge Brown then warning of “no good reason” for the “serious and significant delay” in filing for a review, Cowan’s LLP, Cranham Sports, appealed to the Upper Tribunal.

In total, four grounds of appeal were filed to the UT, including that Leslie’s heat-of-the-moment email (of Dec 8th, and sent within 23 minutes of HMRC’s email), constituted a request to review.

Interestingly, this ground was suggested as being creditable by Judge Brown, back at the FTT, who said at the time:

“Somewhat curiously, in my view, the Applicant did not seek to contend that the email of 8 December 2021 was, in substance, a request for internal review. 

“The Applicant [instead] accepted that no internal review was requested at any time prior to 2 February 2022. The Applicant accepted that to have not requested a review was an oversight or mistake”.

'No error of law by the FTT'

But handing down the UT’s ruling on June 20th 2024, UT judges Phyllis Ramshaw and Guy Brannan dismissed all four grounds, saying not one constituted an “error of law” by the FTT.

Carolyn Walsh, a former tax inspector, says all four of the grounds related to Leslie’s central “mistake”.

She told ContractorUK: “[This adviser] missed an important deadline due to arguing that the 23 points he had raised in response to the initial approach from HMRC must be answered immediately, rather than within the framework of an internal IR35 review or an appeal.

“As the adviser did not ask for an internal review, being busy making numerous complaints against HMRC, this was a mistake which gave no protection to the taxpayer when HMRC inevitably moved to settlement of the enquiry.

“But there’s another mistake contractors should make sure their advisers don’t repeat. In Cowan’s case, Leslie effectively… gave [HMRC] a deadline of 22nd Jan 2022 to respond to his earlier correspondence which HMRC had seemingly ignored. 

“Well, it’s not prudent to tell HMRC that you are not going to meet a deadline -- unless you have a good reason, notably something relevant which prevents you from providing HMRC with an answer. Even if you feel aggrieved that your own points haven't been answered, which clearly Leslie was.”

'Leslie got caught up arguing over the technicalities'

In a statement sent to ContractorUK, IR35 contract reviewer Seb Maley suggests there is no easy way the chartered accountant can shake off the error, and errors.

“[Cowan] ultimately [must now] pay the price for his counsel’s mistake,” said Maley, Qdos’s CEO.

“[The] two failed appeals are the result of mistakes made by Cowan’s representative, who it seems was too caught up arguing over the technicalities.”

Tax expert Maley describes meeting statutory deadlines as a “serious matter,” and one which can ultimately decide a case, adding:

“It’s no secret that HMRC is cutthroat about deadlines, but so is the tribunal system.

“Now, through no fault of his own, Cowan hasn’t had the opportunity to put forward his case -- or demonstrate his [IR35] compliance.”

'A masterclass in missing the point, in a shirty way'

Similarly sympathetic to Cowan, who in 2001 took former world No 1 Pete Sampras to five sets at Wimbledon, is an adviser to contractors who declined to be named.

The adviser says: “This former British tennis ace’s adviser just put on a masterclass in missing the point, missing a key deadline, and how not to deal with HMRC.

“An arrogant, unprofessional approach has had dire consequences for the high-profile taxpayer here, as playing your own game, to your own rules, in a shirty way with HMRC, doesn’t go down well or impress the courts.”

'Cowan IR35 case serves as a reminder'

At the very least, acknowledged another adviser -- Charlie Hemsworth -- Cowan’s case shows “what can go wrong when a legal team” is “too bullish and misses the basics.”

“The Barry Cowan IR35 case serves as a harsh reminder of the unforgiving stance of HMRC and the courts regarding deadlines,” Hemsworth, a director at Bauer & Cottrell told ContractorUK.

“So while the technical arguments are crucial in IR35 cases, diligence in managing the procedural aspects is just as important.

“But due to the failings of Cowan’s agents, we'll now never know if Cowan’s appeal might have saved him from a hefty tax bill.”

'Key lesson for contractors'

The HMRC liability which Cowan faces was not disclosed at either of the appeals.

The UT’s ruling only states that HMRC asserts that had the arrangements between Cowan and Sky taken the form of a contract between the parties, he would be regarded as employed by the broadcaster, with the result that “additional income tax and class 1 national insurance contributions were due."

Bauer & Cotrell director Ms Hemsworth reflected last night to ContractorUK: “Cowan's long, drawn-out saga is yet another reminder of how these IR35 disputes can drag on for years, creating a lot of stress and uncertainty for the taxpayer.  

“For contractors, the key lesson is to make sure you're working with representatives who not only know the ins and outs of IR35, but also have a solid track record in managing these cases successfully, thereby avoiding costly mistakes.”