In IR35

A specialist in IT contracting has won a five-year long battle with HMRC over her IR35 status, the news outlet Shout 99 reports.

Elaine Richardson, who owns ECR Consulting Ltd, was accused in November 2005 of being a disguised employee.  As with a significant number of contractors who work through their own limited companies, she fell victim to the ambiguities surrounding IR35 from that moment onwards.  At the time, she was working as a freelance contractor for the firm Vertex Data Science; should HMRC have succeeded in designating her as a disguised employee, she would have faced a wounding tax bill of more than £50,000.

Thankfully, her recent tax tribunal found that on all three key status tests, her company was clear of IR35.  The tests – mutuality of obligation, substitution and control – clearly proved to the tribunal that ECR, in its wording, “is a genuine business and therefore not a target of the IR35 legislation.”

The tribunal ruling went on to acknowledge that ECR operates from a dedicated business area at Ms Richardson’s home, has a company domain and a website and advertises its services as a member of the PCG.  It has, the ruling continued, “… retained reserves and invested in development and has over the years taken on fixed price work for a variety of clients”.

Ms Richardson was represented by tax specialist Matt Boddington of Accountax Consulting, who expressed his satisfaction in the findings, saying that the Tribunal “had their commercial heads on and understood that contracting through a single person limited company is a prudent and sensible method of providing freelance services, and not about disguising employment”.

His views were endorsed by PCG Chairman Chris Bryce, who added that his organisation aims to “take all legitimate freelancers out of the scope of IR35”.

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