In IR35

A tribunal judge has rejected HMRC’s online Check Employment Status for Tax (CEST) tool by ruling that a contracting professional was, according to case law, self-employed and not inside IR35 as the controversial test had determined.

Business analyst Tony Elbourn was contracted by the Met Office between August 2017 and January 2018 and appears to have been paid by the recruitment agency that sourced him, Qualserve Consulting Ltd. Although details of the case are sparse, it seems that Elbourn was deemed by CEST to be inside IR35, a status that led him at the end of the engagement to make a claim for unlawful tax and national insurance deductions from wages.

At the tribunal, the judge found that he was neither an employee nor a worker, but self-employed – a finding that means that IR35 could not have applied to his engagement at all.

The presiding judge, Judge O’Rourke, founded that Elbourn “was given a project and, apart from a weekly meeting to check on progress, he was his own master”.

Commenting on the ruling, Dave Chaplin, the founder and CEO of the online support service for contracting professionals ContractorCalculator, said that it represented a “hammer blow” for HMRC, calling into question the reliability of the CEST tool in a case in which the freelancer’s self-employed status was in reality never in doubt.

The case, he said, presents thousands of other contractors who have similarly been overtaxed due to IR35 reforms and inaccurate CEST determinations with a straightforward means of recouping what rightly belongs to them.

Chaplin referred to the “bizarre” defence tactics of HMRC which argued, even though the Met Office had decided using CEST that Mr Elbourn was a ‘deemed employee’, that he was actually self-employed. This made it inevitable that Mr Elbourn would win no matter what the Judge decided. Either he was outside IR35 and shouldn’t have been taxed as an employee, or a worker or employee, and shouldn’t have been forced to pay employers’ NI.

Predicting many more cases in which judges contradict CEST’s status determinations, Chaplin said that the Elbourn v The Met Office ruling adds to a mound of evidence showing that HMRC’s tool is shockingly inaccurate and should be withdrawn.

He added: “This judgment comes just weeks ahead of the Chancellor’s Budget and I hope will make the Government think twice before ploughing ahead with its plans to announce its roll-out of the off-payroll reforms into the private sector. The Government has enough on its plate with Brexit. It would be shooting itself in the foot if it goes ahead and extends this damaging legislation to the private sector.”

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