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IR35 tribunal sees Nationwide IT contractor lose second enchantment towards £70,000 HMRC tax invoice

An IT contractor who acquired an IR35-related £70,000 tax invoice by HM Income & Customs (HMRC) has had his enchantment pertaining to the case dismissed by a tribunal choose for a second time.

Challenge supervisor Robert Lee acquired a £70,000 tax demand in relation to a sequence of IT-related outdoors IR35 contracts he accomplished for Nationwide Constructing Society between 2012 and 2015, delivered by way of his restricted firm Northern Lights Options.

Nonetheless, HMRC claims the way in which Lee labored with Nationwide meant his engagements ought to have been labeled as inside IR35, making him liable to pay the identical Nationwide Insurance coverage Contributions (NICs) and Pay-As-You-Earn (PAYE) tax as a everlasting worker would.

Lee initially tried to problem HMRC on the matter by way of a First-Tier Tribunal in February 2020, however his enchantment was dismissed. He was then granted permission in July 2020 to lodge one other enchantment, which paved the way in which for a two-day Higher Tribunal listening to in Might 2021.

The result of that listening to has now been made public, with the Higher Tribunal choose confirming this second try at an enchantment by Lee has additionally now been dismissed on varied grounds, together with the excessive ranges of management that Nationwide had over how Lee labored throughout his engagement.

One more reason why the enchantment was dismissed is as a result of the tribunal disputed the declare that Lee had a real proper of substitution, which is taken into account a key determinant of whether or not a contract is outdoors IR35 or not.

In an outdoor IR35 context, contractors ought to be capable to show that their end-client isn’t solely reliant on them to ship the companies they’re being contracted to supply and {that a} substitute with the identical abilities, and expertise may very well be appointed and step in if wanted.

Proof shared within the tribunal notes suggests it will not be viable for Lee to “ship another person to do the work” as a result of they’d not “get by way of safety, they’d not have a laptop computer nor data of the work. The fact was that it was not going to occur.”

Dave Chaplin, CEO of contracting authority ContractorCalculator, has described the end result of the ruling as “considerably unfair”, and stated the end result seems to be all the way down to a lack of expertise by the tribunal judges concerning the actuality of engaged on an IT venture.

“Lee’s contract did embrace a legit unfettered proper of substitution, nevertheless it was by no means exercised, and the shopper by no means gave witness proof to again it up as a real proper,” stated Chaplin.

“The judges selected to ignore these substitution clauses. Substitution is not any silver bullet to definitively proving a employee isn’t employed until it has taken place.

“Whereas I’ve some misgivings about among the conclusions drawn, the regulation seems to be appropriately utilized,” he stated.

“Nonetheless, many companies are one-man bands and ship their companies personally. However that alone doesn’t imply they’re all workers.”

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