An IT contractor who has been the subject of an IR35 investigation for the past five years has finally won his case against HMRC. This freelance worker had provided an abundance of evidence to prove that he was self-employed and not subject to the control associated with working for anyone else, yet HMRC began investigating him at the end of 2004.

This freelance worker has been supported by the Professional Contractors’ Group (PCG) throughout this process. They have commented that despite HMRC probing this freelancer for nearly five years, they did not even come close to proving that he owed them taxes as a result of having ‘employee status’. The group said that one of the main issues was that HMRC did not understand the way that he worked or the manner in which he worked for his clients. Unfortunately this is a common misunderstanding between contractors and HMRC.

The freelancer in question actually closed his company which the PCG said left “no way of paying the liability”. HMRC themselves held up the investigation, at one point taking five months to reply to the freelancer’s adviser.

The IT contractor changed his adviser to Accountax to coincide with the case going to independent review in June. Accountax compiled a six page report which detailed the manner in which he worked and the failings of HMRC throughout the investigation process. Last week, Accountax were contacted by HMRC to say they were now dropping the case.

PCG made this comment on their website: “This case demonstrates the fundamental importance in arguing IR35 enquiries forcefully and applying the pressure on HMRC. Over four years worth of distress and painstaking delays for the PCG member neatly tied up within 9 months simply because the pressure was put on the inspector to reply to all points, on time. For the contractor’s part, he said he felt his adviser’s efforts in recent months had forced the Revenue to withdraw, and added he was ‘delighted the nightmare was over’.”

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