The Inland Revenue has dropped its IR35 case against Steve Milsom, based in Sandy, Bedfordshire, a member of the Professional Contractors Group (PCG). His company, Surton Limited, specialised in software testing. The Revenue’s decision followed a long battle lasting nearly two years. Steve had innocently submitted his contract to the Revenue for review, long before the freelance community understood the risks associated with so doing. Not surprisingly, his contract was pronounced as falling within IR35.
“After a mountain of correspondence had exchanged hands,” says Steve, “my accountant suggested that I should go to court. PCG agreed to support my case, and assigned Accountax to take care of me. In October, they requested a hearing at the Special Commissioners, but in January I received yet another letter from the Revenue, this time stating that it was dissatisfied with the investigation and had passed it to another inspector.”
45-year-old Steve is relieved and pleased that his case has been dropped, but very angry that that he and his wife, Mandy, have had to suffer so much stress for so long. “We even sold our house,” he explains, “so that we would have enough money to pay all this additional tax if we lost our case. The worst thing has been the uncertainty, especially since I’ve always been so meticulous about my accounts and tax payments. Having been a freelance contractor for 17 years, this saga has put me off running my own business. I started a permanent job in January; my company is no longer trading and I will probably close it.”
PCG chairman Simon Griffiths was delighted to learn that the case had been closed. “Our track record at defeating these cases speaks for itself,” he said, “and I am happy that yet another PCG member has proven that they are a real business and that IR35 should not apply to them. Steve’s client did not control his work, nor was there any mutuality of obligation, so he was clearly in business on his own account and should have been treated accordingly.”
An Accountax spokesman said, “It is disturbing that the Revenue will often pursue weak cases, apparently on the basis that they hope to win what is often nothing more than a war of attrition. An IR35 dispute should be about establishing facts and applying the correct legal principles in order to quantify the correct amount of tax and national insurance due – no more and no less. The Surton case shows the importance taking specialist professional advice, and not just accepting what the Revenue says.”
PCG and Accountax recently announced a no win, no fee IR35 Payback scheme that will enable many freelancers who have paid up under IR35 to claim back their tax paid. The first 50 freelancers accepted on to the scheme will receive £1,000 of their repayment immediately by way of a cheque from Accountax in advance of repayment by the Revenue – and will keep it even if the Revenue eventually wins the case.
Mar 17, 2004
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