Contractors to fight their IR35 cases at tribunal

A few fights contractors have been having with the taxman about their IR35 status are soon to be made public because they are going to tribunal, minutes of the latest IR35 Forum show.

Assembled together in November, the forum’s members heard that HM Revenue & Customs has “opinions outstanding and [that these] cases are proceeding to tribunal.”

Although sometimes seen as an ominous development, going to tribunal is not something a contractor should fear if there are solid grounds to do so, IR35 advisory Abbey Tax has said.

Indeed, contractors who’ve received an inside IR35 opinion from HMRC can appeal directly to the tribunal as one of two ways to object (the other being an Internal Review by tax staff).   

But a tribunal judgement is binding, and is determined not only by the contractor’s working practice but also by ‘whoever’s evidence is preferred on the day,’ Bauer & Cottrell has said.

The firm, which advises on IR35, has also pointed out that choosing to represent one-self at tribunal is, although potentially risky, a way to head off cross-examination by HMRC.

Whether represented or not, the contractors who’ve appealed to the tribunal pass HMRC’s ‘cost-benefits’ test – in other words, to HMRC the cases are worth fighting for at tribunal.  

If the contractors don’t agree with the tribunal’s decision (as Dragonfly Consultancy and numerous other contractors haven’t), they can ask higher courts to consider their appeal.

Editor’s Note: Related Reading –

Contractors’ Questions: What now that HMRC says I’m inside IR35?

IT contractor ‘genuinely in business’ beats IR35 claim

HMRC unveils new IR35 guide for contractors

UPDATE: On March 23rd 2015, the Treasury said:

"Four IR35 cases have progressed to Tribunal in the last 5 years, all in 2011.

These tribunal actions represented civil litigation and in all four cases the customer’s appeal was allowed. All IR35 enquiries have been carried out using civil investigation powers, IR35 being anti-avoidance tax legislation. Where Tribunal hearings are required these would be on the basis of civil rather than criminal action, so there is no question of prosecution or acquittal, and customer appeals against tax charges are either allowed or dismissed."