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IR35 strikes again

A computer consultant has recently lost a case in the High Court on the so-called 'IR35 rules'. These charge tax on people who work through their own companies - 'personal service companies', or PSCs - as if they were employees of the company's customers. In this case, the consultant worked for his PSC, which sold his services to the big computer company EDS, which used him on a contract at the premises of...the Inland Revenue! The Revenue argued that he was in effect an employee of EDS, and PAYE and NIC should be due accordingly.

The consultant presented his own case when he appealed to the General Commissioners, and lost. He had professional support when he went to the High Court, but once you have lost at the first stage, you are always on the back foot. He lost again. If his argument had been better presented to start with, he might have won.

There are two main points that come out of this. The first is the obvious one - a tax appeal is a serious matter, and if you are a computer consultant, you may not be the best person to present the case, just as an accountant may not be the best person to write a payroll program. The second is that the Revenue have won a High Court case showing that a borderline case was caught by IR35, and this may increase their confidence in similar cases. We can advise you if you are worried about a possible attack under IR35.

The case is Synaptek Ltd v Young. It was written up in Taxation, 17 April and 1 May 2003.