Article - Revenue wins first IR35 case (Battersby v Campbell).
In the first IR35 case to go before the Special Commissioners an IT contractor has lost his appeal against the Inland Revenue determination that IR35 applied to his engagement. An anonymised Special Commissioners decision was released on the 31st of October in the case of Battersby v Campbell (HM Inspector of Taxes) heard before a single Commissioner on the 3rd of August 2001.
The facts were that Mr Battersby worked through his own limited company for a bank for almost seven years. During this time he contracted with an agency and also direct with the bank. In the 6-month engagement in question he was contracted via an agency. In April 2001 he took up a permanent position with the bank. The case was concerned with due payments of National Insurance rather than PAYE.
The decision of the tribunal was that IR35 applied due to the fact that Mr. Battersby was required to provide personal service (he had no right of substitution), he was required to work a given number of hours a day, although he was not told how to do his work he was subject to the client’s control, he did not hire his own employees, he did not provide any equipment, he was not subject to any financial risk or opportunity to profit or loss (he was paid an hourly rate), he was part and parcel of the client’s organisation (he was a team leader who was managed, and who himself managed contractors and employees), he provided services exclusively for the bank and the length of engagement had an element of permanency (7 years).
These facts outweighed those in favour of IR35 not applying such as the intention not to be an employee, the lack of sick pay or holiday pay, the lack of job security and the custom in the industry for contractors to be treated as self-employed.
Although this would have been a hard case to win on the facts Mr. Battersby did not assist his situation by representing himself. The Revenue will always have the upper hand against those who choose not to seek professional assistance. In his submissions Mr. Battersby did not support his arguments with case law nor was he in a position to refute the case law cited by the Revenue. In fact, many of the Revenue’s arguments could have been challenged by reference to modern case law precedents.
The Commissioner’s role is to determine the facts and apply the law as presented. So where a contractor does not put forward any case law to support his arguments then the Commissioners will have little option but to find in favour of the Revenue.
Adrian Marlowe, MD of Lawspeed, said “It is vitally important to have proper representation when facing the Revenue, we have successfully challenged the Revenue in many IR35 appeals, before getting to the Commissioners, and our results are always based on detailed analysis of the legislation and applying the relevant case law.”
He went on to state that, “Contractors with a genuine business operation who have sought advice and negotiated effective contracts should not be too worried by this result.” Decisions by the Special Commissioners do not set legally binding precedent but they may be of influence in other hearings before the Commissioners.
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