A professional IT consultant has defeated HMRC in an IR35 tribunal case, which has again highlighted many of the concerns surrounding IR35. Richard Alcock successfully appealed a HMRC tax bill concerning engagements entered into by his limited company, RALC Consulting Ltd, between 2010 and 2015.
Alcock worked on a series of assignments with former employer Accenture, and DWP, a client of Accenture’s whose projects Alcock had worked on. While HMRC relied heavily on the implication that Alcock was still an employee of these companies, Judge Rupert Jones found no evidence to suggest that this was the case.
Mr Alcock was supported by both his written contractual arrangements and his daily working practices, which indicated a contract for services. No less than eight individuals provided witness statements on his behalf, while HMRC called no witnesses.
The outcome of the case rested largely on mutuality of obligation (MOO). Judge Jones accepted that Mr Alcock was clearly employed on his own account, summarising his situation as follows: “He agreed the work to be done, and only that work to be done. And then he billed only for the work done. His contract specifically states that he can only charge for work actually completed. And to top it off, in one instance they did cut the project short at a moment’s notice, and he was not paid.”
The case has again demonstrated the importance of MOO in determining employment status, while also highlighting the inadequacies of CEST, which fails to include it. Despite this, Alcock’s case was assessed using CEST on several occasions by his defence, and on each one, the tool found that IR35 did not apply. Consequently HMRC tried unsuccessfully to have the supporting analysis work, including the CEST verdict, omitted from consideration by the tribunal.
The taxman’s readiness to dispute CEST when it delivers an outside status is contrary to HMRC’s statement that it will stand by determinations issued by the tool. A point which HMRC recently reiterated in their Briefing document. This provides little reassurance for hiring organisation using the tool, with NHS Digital’s Annual report recently showing a £4.3m tax bill after HMRC contested its CEST assessments that indicated an ‘outside IR35’ position.
The tribunal also touched on the elements of ‘substitution’ and ‘control’ in relation to the engagement, finding that these were within permissible limits. Although Mr Alcock’s right to substitution was not completely ‘unfettered’ and his client supervised some of his work, there was enough evidence to suggest that Alcock held a substantial degree of control over his working practices.
Unfortunately, Mr Alcock’s business has endured severe financial repercussions during the five-year- investigation and is now significantly in debt. Although the tribunal outcome was a victory for Alcock, the case highlights how much damage can be done to contractors who must try and make a living while conducting a legal battle. Mr Alcock is now considering full time employment at a time when his IT skills would be a valuable asset to the contracting sector.
This content has been supplied by IR35 Guru.
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