Latest HMRC defeat shows ‘ludicrous complexity’ of IR35 rules


IPSE, the Association of Independent Professionals and the Self-Employed, has said the latest tribunal defeat for HMRC demonstrates yet again the ‘ludicrous complexity’ of IR35 tax law.

The Association has spoken out after IT contractor Ian Wells successfully appealed an HMRC tax bill for over £26,000, after being caught under IR35 tax law.

In the case of Jensal Software Ltd v Revenue and Customs, the court concluded that all elements of Mr Wells’s contract pointed towards him being an independent contractor and not an employee. Judge Jennifer Dean said: “the level of control falls far below the sufficient degree required to demonstrate a contract of service.”

Mr Wells is just the latest innocent independent contractor to be caught out by the complexity of IR35 and pulled into a long and costly tribunal case.

Andy Chamberlain, IPSE’s Deputy Director of Policy, commented: “This latest defeat suggests IR35 is so ludicrously complex that not even HMRC can understand it.

“Ian Wells is yet another self-employed person who has been pulled into a pointless, costly and drawn-out IR35 case by HMRC, only to be spat out at the end of it with a judgement that the case shouldn’t have come about at all.

“If HMRC, with all its resources and expertise, cannot make an accurate IR35 determination, how can it expect anyone else to get it right? The Government must urgently reconsider any proposals to shove responsibility for determining IR35 status onto end clients.

“This judgement also raises serious questions about HMRC’s Check Employment Status for Tax (CEST) tool, which was created supposedly to simplify IR35. If HMRC used the tool to check Mr Wells’s status and still found that he should be caught by IR35, then it confirms what us and many others have said previously: the tool is fundamentally flawed and should be scrapped.”

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