Yesterday, Ian Wells, represented by IR35 specialist Qdos Contractor, won his First-Tier Tribunal Chamber IR35 case against HMRC.

Wells provided business analyst services through a personal service company – Jensal Software Ltd – via agency Capita Resourcing to the Department of Work and Pensions (DWP) between 28 May 2012 and 4 April 2013.

The appeal hearing took place on 4-6 October 2017, with Judge Jennifer Dean yesterday ruling Wells’ contract was a contract for services not a contract of service and therefore belonged outside IR35, primarily due to the absence of a sufficient degree of a right of control over Jensal’s working methods, while the judge also disagreed with HMRC’s interpretation of mutuality of obligation (MOO) – the obligation of an employer to provide work and pay for it.

In March, contractor Mark Daniels won a similar IR35 appeal case against HM Revenue & Customs.

And according to Seb Maley, Qdos Contractor CEO, this latest case casts further uncertainty on HMRC’s ability to accurately recognise IR35 status.

Maley said: “Firstly, we’re delighted to have helped Mr Wells win this case. Fighting IR35 places a huge burden on a contractor, so we’re thrilled to have successfully represented him, meaning he can now work without this hanging over his head.

“Despite HMRC implementing and enforcing the rules, this verdict shows they can’t accurately assess a contractor’s IR35 status. The government is serious about clamping down on what they believe to be non-compliance, but worryingly, can’t recognise whether a contractor belongs inside or outside IR35. That the individual was working on a government project simply adds to the irony.

“This case is further proof that IR35 needs simplifying, and HMRC must rethink its IR35 strategy completely. Clearly, this is no time to extend public sector changes to the private sector.”

Meanwhile Dave Chaplin, CEO and founder of contractor advice and information provider ContractorCalculator, described the case as a “slam-dunk win” for Wells.

“With the evidence being so compelling for the contractor, including a perfectly valid right of substitution, a lack of control and insufficient mutuality of obligation, one must question why HMRC pursued this case at all. It was a complete waste of taxpayers’ money and court time.

“This case clearly highlights that HMRC does not understand IR35, does not understand employment status case law, and is not capable of effectively enforcing the legislation.

“Of particular note was the judge’s clarification on the key employment test of mutuality of obligation, or MOO. The ruling contradicted the recent claims put forward by HMRC that all contractors are caught by MOO, which they used to justify why they did not include it in their IR35 tool (CEST).

“If HMRC is capable of making mistakes of this magnitude how can they expect companies that hire contractors to make accurate assessments? HMRC has been naïve to assume that asking clients to assess employment status for tax purposes was going to be easy and we have seen the disastrous impact it has had so far on the public sector. HMRC should now abandon all attempts to roll out these reforms to the private sector before further damage is done to UK Plc.”

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