A contractor has won a “borderline” victory in his IR35 case after the judge ruled that Mr Brajkovic did not become “part and parcel” of Avecia and therefore did not owe PAYE, NICs or interest for the period from 2000 to 2002.

Mr Brajkovic had provided services to the company since 1998 with the organisation providing him with all the necessary IT equipment for him to carry out his duties. He was contracted to Avecia through an agency with the contract stating he was under their “direct supervision”. Brajkovic himself questioned the contract and sent it to HMRC for advice. They, in turn, began an investigation into his working practices eventually concluding that he was an employee of Avecia and thus owed taxes from April 2000 until December 2002.

At the tribunal, HMRC’s representative Alan Hall described Brajkovic as a ‘disguised employee’ who they believed was actually working on a permanent full-time basis. He continued by stating he “did not present an image of a businessman offering his services to the marketplace” and was actually “someone comfortable working for the same clients on terms equivalent to employment.” He also pointed to the terms which required Brajkovic to provide one month’s notice.

HMRC also argues that there was no right of substitution in his contract and his billable hours were “broadly equivalent” to those worked by permanent employees. However, Avecia stated that he enjoyed flexibility which their employees did not.

Handing down his judgement, Judge Kempster declared: Deciding in a borderline case, whether a particular contract is a contract of service or a contract for services in notoriously difficult.” This admission is likely to bolster critics of IR35 who argue that the complexities of applying the legislation are so significant that it should be repealed.”

The Judge than concluded: “We consider that the overall picture painted is one of a contract of self-employment. An individual detail in the picture is that, as we have found, Mr Brajkovic would not have been permitted to supply a substitute to perform the work. That could be an important detail – and was given some emphasis in both Usetech and Dragonfly – but in the particular situation of Novasoft and taking the picture as a whole, that detail does not disturb the overall impression we have formed of the notional contract.”

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