More Evidence That Inside IR35 is Squandered Opportunity for Industry

Many will already be aware of the coverage of Stuart Barnes' successful IR35 appeal to the First-tier tax tribunal.  Arguably this was against the odds, given all three prior Sky TV cases resulted in HMRC victories.  For this reason, and because it's a very interesting case from reading the full judgement, I felt compelled to share my own analysis, snippets of which featured in a recent Contractor UK article. https://www.contractoruk.com/news/0015761taxman_tries_tackle_ex_rugby_union_ace_stuart_barnes_ir35_fails.html.

The case was brought by HMRC for services provided by Stuart Barnes, between 06 April 2013 and 05 April 2019, to British Sky Broadcasting Limited.Full judgement can be found here: https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j12631/TC08697A.pdf

Whilst of course being a hugely positive outcome for contractors, especially for those in the media industry, the judgement could easily be misconstrued or misinterpreted in terms of what drove the outcome. A substitution right was claimed that some may have interpreted as robust, but it was probably invalidated by the fact Sky would engage any alternate resource directly. Some may conclude that we all of a sudden have a precedent that if someone is materially working for more than one client, they must be in business on their own account and therefore outside IR35. I’d suggest it shouldn’t be a factor that is wholly relied upon, and indeed it was not the sole driver in the judge’s finding. From reading the full judgement, even though it is the obligation of the appellant to prove the absence of pseudo-employment, I’d suggest they were substantially assisted in that regard by the inability of HMRC to persuasively demonstrate any characteristics in common with employment.

My main take away would be that this is yet another example that demonstrates the criticality of multiple factors reflecting that the true nature of the relationship is NOT one of pseudo-employment. It should provide reassurance to client organisations that if a relationship with a contractor is genuinely one that is not an indefinite job role in disguise, and if the contractual terms and working practices are in order, which is not difficult to ensure, they should have no concerns about the risk they will face a HMRC dispute defeat or the resulting financial exposure. Clients do not need to compromise on talent acquisition and retention, OR pay substantially more for their critical change-driving resources and teams, if they properly engage resources in contracts for services.