IR35: Little Piece of Paradise ‘cause to think twice on boilerplate contracts’

Firms touting ‘IR35-friendly’ contracts are emerging as the other loser of the Little Piece of Paradise Limited case, alongside director-owner Dave Clark.

Reflecting on the former Sky Sports presenter’s defeat, tax expert Graham Webber said he “really” hoped the judgment triggered a turnaround in how IR35 ‘solution-sellers’ are seen.

“[Let’s] hope we will [now] see the end of contractors believing the hype of firms promising that the ‘right’ contract -- theirs of course -- will guarantee an outside IR35 result.”

'Snake oil salesmen'

If LLPL doesn’t herald such an end, WTT Consulting’s tax director continued, “contractors will continue to place reliance upon the snake oil salesmen…punting this nonsense.”

But some contractors believe “if they’re paying, they should get to hear something pleasing,” points out IR35 reviewer Philip Bennison, writing online, alluding to an outside IR35 result.

“I've had to disappoint a lot of folks, particularly as I usually work for the end client, who shoulders the risk,” added the reviewer.

“[And in LLPL], a ‘boilerplate contract’ [clearly] didn't live up to the name….[as it] left the worker, [Mr Clark], facing a £281,084 tax bill –[albeit] to be offset.”

'Necessary requirement'

Status specialist Kate Cottrell says the indirect message from the courts to contractors in wake of LLPL is that IR35 contract reviews were – and still are – a “necessary requirement.”

“Any IR35 contract reviewer worth their salt faced with the written terms which Mr Clark had, and the reality of his working practices, would have given an IR35-fail opinion," she began.

“The fact that Mr Clark had a self-employed relationship with Sky from around 1988, only changing when Sky -- with the help of HMRC -- decided they had got this wrong, would also have been taken into account by a competent reviewer.

“Hindsight is of course a wonderful thing but… it should be remembered that it is unlikely that any ‘tool’, including CEST, that does not include human intervention would pick up on all the relevant issues [that undermined Mr Clark’s bid to be outside IR35.]”

'Unusual'

Writing today exclusively for ContractorUK, Ms Cottrell, a former tax inspector, believes it is difficult not to feel sorry for Mr Clark, including what he has been through with HMRC.

But the co-founder of Bauer & Cottrell reserves her sympathy for what the presenter, who suffers with Parkinson’s disease has been through personally.

Contractually, and like Mr Webber, and Mr Bennison, the status specialist believes there is much to potentially learn, even if the case is atypical of contractor working arrangements.

“This case is unusual in its facts and not pertinent to all contractors,” confirms ReLegal Consulting.

Founder Rebecca Seeley Harris suggested last night there’s lessons for advisers to learn too. “But there is a worrying trend at present towards the courts agreeing with HMRC’s arguments. So, instead of fundamentally disagreeing with HMRC’s arguments, perhaps it is time to acknowledge them and find the weakness within.”