How HMRC’s bark is now matching its bite in the IR35 dogfight

You may have noticed, HMRC is on a roll.

Revenue & Customs seems to be winning all its recent IR35 tribunals and, in the main, doing so emphatically.

Several cases have made their way to the Upper Tier tribunal (UT) and beyond, which means they set legal precedent, so with every HMRC win, the net gets a little tighter. It’s unwelcome news for those of us who would prefer to see self-employment flourish, writes Andy Chamberlain, director of policy at IPSE.

IR35: Then and now

It wasn’t always this way.

In the decade or so after the IR35 rules were introduced, HMRC often lost tribunals, but times have changed and so has HMRC’s approach.

Back then, the Revenue might send a tax inspector to make its case; these days you are more likely to find it represented by a team of top barristers, even at the First Tier Tribunal (FTT), as presenter Kaye Adams found out last year.

Incidentally, that case -- Atholl House Productions v HMRC -- was the last significant loss for the taxman. And even then, he didn’t give up easily, appealing to the UT, then the Court of Appeal before losing for a second time at the FTT.

HMRC’s new kitchen sink approach to IR35 cases

It's fair to say that HMRC is taking IR35 tribunals much more seriously than it used to. It’s also not scared to spend significant sums of taxpayers’ money on legal representation to achieve the outcome it’s looking for.

Ostensibly, the outcome it’s looking for is to win that specific IR35 case -- and collect the additional tax which is ‘due’ in the process.

But worryingly, recently, there are plenty of examples where HMRC is diverting considerably more resources than it will ever recoup should the tax authority win.

What’s behind HMRC’s shift to ‘win at all costs’?

One simple answer is that everyone should pay the correct amount of tax, and even if the Revenue has to spend money to ensure that happens, it’s the right thing to do -- HMRC is just doing its job.

Then there is the deterrent effect.

HMRC is very clearly making the point that where it believes the IR35 rules apply, it will be tenacious in its enforcement of those rules.

It’s also a firm reminder to contractors’ end-clients to make sure that, under the off-payroll working rules, their status determination processes are robust, meaning they must be able to demonstrate it (should they be asked by HMRC to demonstrate their SDS process).

Taking the fight out of contractors

Similarly, the ‘win-at-all-costs’ taxman may deter IR35-caught contractors from appealing to the tribunal in the first place.

To win, you may need to procure expensive legal representation yourself and even if you do win, HMRC may well appeal.

Some contractors will perhaps feel it’s easier to just pay the additional tax, even where there is a reasonable prospect of success at tribunal.

An IR35 win for HMRC is often more than it just winning that one case…

The other potential motive for HMRC’s vigorous pursuit of tribunal victories is to tighten the status rules themselves.

Employment status is determined by case law. The FTT does not set precedent but the UT, the Court of Appeal and the Supreme Court do.

Judgments on IR35 issued from these courts influence future interpretations of the Intermediaries legislation and are frequently referred back to by judges when ruling on current cases.

So, when HMRC wins a case, it’s often not just winning that argument; it’s winning on a point of law which can then be applied to future cases.

Referees calling full-time on mutuality of obligation

The big turning point was the Supreme Court’s decision on the Professional Game Match Officials (PGMOL) case, which strengthened HMRC’s position on mutuality of obligation -- a key test when determining IR35 status.

The SC propped up HMRC’s view that, in general terms, there is always going to be mutual obligations in any contractual arrangement, effectively removing the ability to argue IR35 does not apply due to a lack of mutuality in future cases.

The Supreme Court did go on to say that the extent of mutual obligations is still a relevant factor, but in terms of the so-called ‘Stage 1’ mutuality test, this was a significant win for HMRC.

Setting precedent

The PGMOL ruling was published last September.

Since then, HMRC has also won IR35 cases against Sky Sports presenters Stuart Barnes and Phil Thompson, urologist Dr George Mantides, and it partially won against former England captain Bryan Robson.

Each of these IR35 cases, except Bryan Robson’s (which didn’t get beyond the FTT), sets further binding precedent, and broadly speaking, all of that precedent could help HMRC to win future cases.

What does the ‘win-at-all-costs’ taxman mean for IR35 and contractors?

For contractors in 2025-26, where their clients are making determinations on their behalf, these cases, and HMRC’s dogged approach to winning at tribunal, will likely make it harder to find outside IR35 assignments.

Clients have always been nervous about issuing ‘outside IR35’ determinations, and the general mood music from the courts -- which will no doubt put a spring in the taxman’s step -- probably won’t help.

Our push for an employment status rules rethink (continues)

At IPSE, we have been pushing for a rethink on employment status rules.

We would like to see clearer rules that would help genuinely self-employed people stay away from these never-ending arguments over status, and that would give clients the confidence to hire them.

The government has indicated it might be prepared to look at this, although no firm commitments have been made.

Contractors, don’t just sit there and watch. We’re not…

But what is clear is that something needs to be done.

The courts and HMRC have, between them, created a sort of unwritten definition of employment from which it’s getting harder and harder to escape.

And yet we know there are many people that want to work independently; there are clients that want to work with those people, and when it’s allowed to happen there is a net economic benefit. We need your help to carry on our campaigning, so please do consider joining IPSE if you are not already member. Your support means we can continue to give contractors a voice, even when -- and especially when -- it seems the tide is turning against them.