When it comes to handling IR35 cases, Dave Chaplin, the founder of IR35 Shield, a software company, shares his insight on the matter. According to his experience, the HMRC team does not consistently analyze every case in line with litigation standards, which is against their own Charter.
He contends that instead of conducting thorough fact-finding, HMRC often focuses on finding fault. This implies that the IR35 team prioritizes winning cases over establishing the complete facts, resulting in taxpayers potentially paying more or less tax than legally required.
An example of this issue involves TV presenter Kaye Adams. Despite winning her case in the first two tribunal hearings, she is now compelled to go back to court for the fourth time in October. The Court of Appeal deemed that the previous judges had applied incorrect tests. Consequently, she now faces significant costs exceeding the actual tax amount. Is this fair?
HMRC has also appealed decisions in cases involving broadcaster Adrian Chiles, Rugby commentator Stuart Barnes, and even Gary Lineker, despite the tribunal ruling that IR35 does not apply in his case.
Another complication with IR35 cases lies in the fact that three parties are involved in the litigation process: the service company, HMRC, and the customer. Often, the customer holds crucial information needed to understand the hypothetical contract proposed by HMRC. But being a third party, they may not want to get involved.
An example illustrating this predicament can be found in the evidence presented by the BBC to the Public Accounts Committee in 2017. In a letter to the HMRC Permanent Secretary, the BBC deputy director general expressed their concern: “It appears to us, as a result of these conversations, that HMRC expects the BBC users of the ESS (employment status tool) to answer the questions in a way that does not reflect the BBC’s understanding of the underlying factual position in order to obtain a result that HMRC is prepared to agree.”
An HMRC spokesperson responded, saying: “As outlined in our charter and Professional Standards for Compliance, we are committed to treating all taxpayers with respect and assisting them in paying the correct amount of tax – no more, no less.
“In every case, we determine the tax payable under the law based on evidence, regardless of the taxpayer’s wealth or status. It is not advantageous for either taxpayers or HMRC to evaluate and, if necessary, challenge a case on any other basis.”
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