HMRC suffers blow as contractor successfully appeals IR35 ruling

HM Revenue & Customs (HMRC) has lost an IR35 Tribunal against an IT contractor who faced liabilities totalling £243,324.

In yet another example of the failures surrounding the IR35 (off-payroll) rules, IT consultant, Richard Alcock has successfully appealed against an IR35 decision, which means he is no longer liable for the sum.

During an investigation lasting five years, Mr Alcock defended his position after HMRC claimed that Mr Alcock should have been operating inside IR35 on several engagements, whilst working with Accenture and the Department of Workplace and Pensions (DWP).

The appeal by Mr Alcock was primarily won on the fact that Mutuality of Obligation (MoO) could not be demonstrated. This principle is based on an obligation that a business has to provide paid work and the obligation that an individual has to accept it.

Chris Leslie, who represented Mr Alcock, said: “He agreed the work to be done, and only that work to be done. Then he got to work, and worked very hard indeed to meet the outcome goals. And then he billed only for the work done. His contract specifically states that he can only charge for work 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.”

This arrangement, so clearly laid out in his contract, meant that MoO did not exist and the Courts therefore found that he was not liable.

This latest decision once again calls into question the reliability and accuracy of HMRC’s CEST tool for checking IR35 status.

MoO – one of the key IR35 status tests established by numerous court cases – isn’t included in CEST, as it works on the presumption that it is present in all engagements. HMRC is said to be currently ‘enhancing’ this tool so that it is more accurate, after it was found to only work in around 85 per cent of cases.

Speaking to Contractor Calculator, Mr Alcock criticised the taxman for placing “immense pressure” on him and his family, before adding: “I cannot understand why HMRC pursues contractors so much. Their bullying tactics have been extremely stressful, made all the more difficult to bear since the verdict has ruled in my favour. I should never have had to go through this in the first instance.”