• HRMC Drops Prosecution in an IR35 Case Aug 1, 2018
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    In a bizarre case, the HM Revenue and Customs (HMRC) have dropped an IR35 prosecution against a contractor. The case that was highlighted by Andy Vessey — an IR35 expert at Qdos Contractor. The case involves a contractor named Gary Philpot.

    Mr. Philpot who is the director of GMPFive Consulting Ltd (GMP5) had received a notification from HMRC in July 2015. The notification letter had stated that HMRC was investigating the accounts for the previous two tax years — 2013/14 and 2014/15.

    HMRC had received IT services from Mr. Philpot who worked as an independent contractor. After the initial letter, a meeting took place between GMP5 and HMRC. Mr. Philpot after getting advice from Qdos Contractors’ Andy Vessey insisted that his work was outside IR35. But HMRC’s Status Inspector after consulting with three end-clients had concluded that he was caught by IR35.

    Criticisms Apropos the IR35 Implementation

    IR35 laws that were introduced last year in the public sector have attracted a lot of criticism. Experts have criticized the new legislation that has resulted in a lot of irregularities. It has created a financial burden on the contractors whose work is deemed to be inside IR35.

    Qdos demanded an independent review to prevent the matter from going to the tribunal. The review upheld the decision and stated that the payment of £59,000 was inside IR35.

    Vessey has severely criticized the reviews that are just fair accompli and a waste of time. He says that the reviewing officers generally ignore pertinent case laws. They don’t consider recent judgments of tax tribunals when making a decision. HMRC’s response to discarding the rulings is unfair. The agency does not act impartially considering IR35 cases.

    The Status Inspector had tried to prevent GMP5 from pursuing the case in the tribunal. However, Qdos advised the client to push ahead with the appeal. The appeal was expected to be heard at the end of May this year. But in a surprise move, HMRC decided to close the case against Mr. Philpot.

    HMRC may have acted in this manner after the Chartered Institute of Taxation (CIOT) had accused HMRC to be overzealous in pursuing IR35 cases. The chartered firm that had sent the complaint letter to the Treasury Sub-Committee stated that the tax agency purses cases even when there is little chance of a success. This may be the reason that HMRC had dropped the case acting against its own Litigation and Settlement Strategy to apply rules consistently and impartially.
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