HMRC contractor wins IR35 payout

A contractor who worked for HMRC has successfully claimed over £4,000 at an employment tribunal after the tax authority insisted she was not self-employed under IR35 rules but failed to make arrangements for holiday pay

In September 2016 Susan Winchester’s company, SJW Marketing Solutions Ltd, was engaged by HMRC to provide marketing services on a contractor basis.

Subsequently with the changes to the off-payroll rules in the public sector about to come into force, HMRC ran the engagement through its check employment status for tax (CEST) tool and determined that IR35 applied.

As a result, HMRC required Winchester to go onto an agency payroll, a decision that could not be challenged.

Winchester claimed that as she was then effectively an agency worker under the regulations, she was therefore entitled to a clear, transparent amount of holiday pay and to the same holiday entitlement as employees of HMRC.

Earlier this year Winchester, launched a claim in the central London employment tribunal against HMRC, the agency Kinect Recruitment Ltd and three other parties in the contractual chain. The claim was for £4,200 in unpaid holiday pay under the agency workers regulations.

On the morning the tribunal was due to start, the parties agreed to settle the case for the full amount being claimed.

The Association of Independent Professionals and the Self-Employed (IPSE) which funded and backed the action described the ruling as ‘a body blow to the government’s chaotic and damaging IR35 policy’ and said the case ‘directly challenges controversial 2017 changes to off-payroll rules in the public sector’.

Chris Bryce, IPSE CEO, said: ‘Susan’s case sends a very clear message to clients, that if you are going to treat contractors like workers, then you’ve got to give them worker entitlements.

‘You can’t just decide someone is inside IR35, shunt them onto an agency payroll and expect someone further down the line to pick up the tab for your obligations like holiday pay.

‘This is further proof that the IR35 changes have sown chaos and confusion since they were introduced in the public sector last year. What’s even more extraordinary is that one of the culprits here is HMRC.

‘If HMRC don’t understand their obligations under a system they’ve created, how can they expect businesses to get it right?’

In a statement, HMRC said it does not discuss identifiable individuals: 'In general, in deciding if the off-payroll working rules in the public sector applied, HMRC would consider a number of factors, including how the engagement worked in practice, as well as examining the contract itself. HMRC were committed to ensuring that its approach to the changes as an engager was clear and transparent.'

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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