The recent Stringer v HMRC ruling by the House of Lords declared that certain contractors could claim holiday pay from their clients. Certain contractors, so-called ‘permtractors’ could be claiming relatively large payouts. This news could go a long way to encouraging clients to ensure that the contractors they employ are outside of the IR35 legislation. This ball is certainly in the client’s court, especially considering the recent ruling on the Tilson case.

Accountax Consulting were one of the first to report on this case. Mark Taylor from the group said, “The Lord’s ruling means you can be self-employed yet still be a worker entitles to paid holiday. The ruling means their claims are no loner limited to the current annual leave year.”

Taylor then discussed the unlimited claims that could result from this ruling, stating, “In the past, most firms would pay off the worker, as a year’s holiday pay – the previous maximum – cost less than an Employment Tribunal defence. However, with one backdated holiday award, that in the Canada Life v Gray case, being in excess of £30,000 the financial impact on clients could be disastrous.”

Contractors will need to think very carefully about their IR35 status before they consider such a claim as HMRC will ask some tricky questions of any contractors attempting to claim holiday pay who have previously declared that they are working outside of the IR35 legislation.

Contractors working through an umbrella company are unlikely to benefit from this latest ruling as they will have a contract of employment with their umbrella company. However, they should check the holiday payments they have received from their umbrella company over the years.

Source: Contractor Calculator

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