IR35 is to be retained but the Government is proposing improvements to provide greater pre-transaction certainty including a dedicated helpline, greater clarity by publishing guidance on the types of cases HMRC view as outside the scope of IR35, restricting reviews to high risk cases and promoting more effective managed engagement with interested parties and an IR35 forum to monitor HMRC’s new approach.
IR35 – providing services through an intermediary
MBF Design Services Limited v HMRC 2011 UKFTT35
The First-tier Tribunal has allowed a consultant’s IR35 appeal notwithstanding that the requirement to provide personal service and the absence of any practical right to provide a substitute and other factors clearly pointed to employment. HMRC ruled that the sole director of a service company contracted to Airbus over several contracts was an Airbus employee for tax and national insurance purposes under IR35 but the service company argued the consultant was self employed and successfully appealed. The tribunal reviewed the case law and set out the guidelines that could point to either employment or self employment. Although the factors pointed to employment these had less weight and could be explained by the “special needs of a very complex and commercially sensitive undertaking”.
Key point: The case needs to be viewed with some caution as it does depend entirely on its own facts. There is no clear set of principles that can be adopted as indicative of an unarguable consultancy arrangement.