IR35 case reaches High Court

Crucial to future of IR35

The Professional Contractors Group (PCG) is returning to the High Court, scene of a crushing defeat, to fight IR35. This time around it is supporting IT contractor Gordon Stutchbury in his case against the Inland Revenue. The case is scheduled for Feb 25-27.

The PCG reckons that the Inland Ruling ruling over Stutchbury's tax status is such a travesty that it should never have got to the High Court. It hopes that this will be obvious to the judge. But if the PCG fails everyone involved in the fight against IR35 really will have to pack up their tents.

Case Background

Gordon Stutchbury, like many contractors, paid his IR35 tax demand just to be on the safe side, and then appealed to the Special Commissioners. He represented himself and lost, even though he had many attributes which appeared to put him outside IR35. He then contacted the PCG which got partners Accountax to represent him.

Stuchbury had a contract with his agency which, in turn, had a contract to supply his services to the Benefits Agency. In the middle of his contract, the Benefits Agency decided to outsource it IT department to EDS. There was no change to Gordon’s contract at all. There was no change to the work he had to do.

There was a change to the agency’s contract, which was now with EDS, and not the Benefits Agency.

Guess what?

Although it has already been decided that Stutchbury’s contract was IR35-free when he worked for the Benefits Agency, it was decided that the part of his contract period when he worked for the Benefits Agency people through EDS was captured by IR35 – even though there was no change to the terms and conditions of his contract.

It's not as if Stutchbury has been contracting at one company for ten years or more. He has contracted at 20 different companies in a period of 12 years, sometimes working for more than one client at a time. If Stutchbury is a 'disguised employee' then he is certainly a master of disguises.

According to the PCG, the Inland Revenue has made some technical blunders, e.g. it got wrong the period of time where Stutchbury was supposed to be working through EDS. The Inland Revenue will also have to reveal in court if it has seen the contract between the agent and the client, EDS, which Stutchbury was never able to see. It is understood that The Inland Revenue may have seen this contract and it may have taken this into account when ruling against Stutchbury. If the Inland Revenue did take steps to get hold of the contract, it could have broken the Data Protection Act .

Winning Victories

Stutchbury is the first major IR35 court case since two defeats in 2001 which the PCG received in the High Court and in the Court of Appeal. The PCG has fresh heart, however, these days, and morale is high.

Since the court defeats, the PCG has won 100 cases on behalf of contractor members, after the Inland Revenue had started investigating them for more tax, IR35 or otherwise. It has also successfully lobbied for the abolition of Fast Track Visas; and removal of IT skills from the Skills Occupation List. The PCG also funded Lime-IT in its successful case against the Inland Revenue over IR35.

Moment of Truth

However, the PCG was set up to fight IR35. It lost two court cases very expensively, but it now has a new opportunity to inflict major damage on the Inland Revenue and on IR35. If the Inland Revenue should lose this case very expensively then it will be less keen to pursue contractors over IR35 – especially if the contractors have the PCG behind them.

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Gerry Mclaughlin is the owner of NamesFacesPlaces, a kind of Friends United for IT contractors.