Construction contractor’s IR35 victory emphasises that further reform must be avoided

Following a construction contractor’s successful IR35 appeal in a First Tier Tribunal this week, IR35 specialist, Qdos Contractor of The Qdos Group, has urged the Government to call off rumoured plans to introduce private sector reform.

In 2016, HMRC decided that MDCM Ltd’s working relationship with client, Structure Tone Ltd, which spanned from 2012 to 2014, resembled employment, meaning the contractor should have been working inside IR35, and made to pay similar taxes to an employee. But, following an appeal by MDCM Ltd, it was determined that the working arrangement reflected self-employment, and therefore belonged outside IR35.

Seb Maley, Qdos Contractor CEO, explained that this shows rumoured private sector reform must be avoided, particularly if it resembles public sector reform, which handed companies the responsibility for setting IR35 status last year:

“If the IR35 legislation itself is complicated to the extent that HMRC themselves can’t correctly identify whether a contractor belongs inside or outside the rules, then how are millions of private sector businesses expected to?

“This case is yet another indicator that speculated moves to extend IR35 reform to the private sector would be unwise. You only need to look at the public sector, and The BBC’s and The NHS’ reported handling of IR35, to see that many organisations aren’t equipped to make accurate status decisions.”

Mr Maley also commented on HMRC’s CEST tool:

“Regardless of the fact this working arrangement took place before the release of CEST, that HMRC lost the case casts further doubt on the reliability of the tool. After all, HMRC built the test, so who’s to say whether IR35 decisions made by CEST are accurate or would stand up in court?

“IR35 is complex, and HMRC must understand this by now. If anything, the case shows exactly why speculated private sector reform should be avoided.”