IR35 history & overview

Introduction

“IR35” is a piece of tax legislation announced in 1999, which took effect from April 2000. (See What is IR35?)

The legislation means that HMRC can tax some contractors as though they are employees of their clients. For those caught it means paying significantly more tax.

This article provides an IR35 overview and lists the key events in the history of IR35.

1999 - IR35 History

Event	Date	Detail
IR35 measures announced.	Mar 1999	Initial HMRC IR35 press release announcing the measures to counter tax avoidance in the area of personal service provision with the intention of them taking effect from April 2000.
PCG formed.	May 1999	PCG formed to combat the IR35 proposals.
Modified IR35 measures accounced.	Sep 1999	Second press release detailing a modified approach based on consultations: onus on the service companies to follow rules; service companies to collect the tax rather than the clients. Existing tests for self employment to be used. Flat rat of 5% allowed for non Schedule E expenses.
Passed in Commons.	Nov 1999	After peers backed down, the Welfare Reform and Pensions Bill (which contained IR35) passed in the house of Lords.

2000 - IR35 History

Event	Date	Detail
Revenue publishes IR35 guidance.	Feb 2000	HMRC publishes FAQs for IR35.
IR35 becomes law.	Apr 2000	Finance Act published – schedule 12 being specific to IR35.

2001 - IR35 History

Event	Date	Detail
Judicial Review	Mar - Apr 2001	PCG took HMRC to a Judicial Review. High Court dismissed the PCG and IR35 remained law.
First IR35 case loses.	Aug 2001	Battersby versus Campbell. First case to go before Special Commissioners is lost.
Second IR35 case loses.	Dec 2001	F S Consulting Limited vs McCaul. Second case to go before Special Commissioners is lost.
Judicial Review - Appeal	Dec 2001	Judges dismiss appeal by PCG.

2002 - IR35 History

Event	Date	Detail
PCG focuses on case law	Jan 2002	PCG drops legal fight with HMRC to focus on case law.
First IR35 case won.	Oct 2002	Lime IT vs Justin First case to be won at the Special Commissioners.

2003 - IR35 History

Event	Date	Detail
IR35 case lost at High Court	Mar 2003	Synaptek vs Young.

2004 - IR35 History

Event	Date	Detail
IR35 case lost	Jan 2004	Usetech vs Young.

2005 - IR35 History

Event	Date	Detail
Tories Propose Abolishment.	Jan 2005	Tories Propose Abolishment of IR35.
Freelancer Loses Case.	Jan 2005	Freelancer Loses IR35 Case.. Netherlane Limited loses at the Special Commissioners.
PCG wins freelancer case as special commissioners.	May 2005	PCG wins case for Mike Ansell

2006 - IR35 History

Event	Date	Detail
Court of Appeal status ruling on employment status.	Mar 2006	Cable and Wireless v Muscat Concerns that contractors could start to claim employment rights. PCG Analysis of Cable and Wireless v Muscat Judgement Fears over Muscat bite

2007 - IR35 History

Event	Date	Detail
Island Consultants Ltd lose IR35 case to Revenue.	Jul 2007	Island Consultants lose IR35 Case Island Consultants Ltd V Revenue & Customs No IR35 Precedent Set, Experts Say
Conservative John Redwood says Tories will "Turn back the clock on IR35 and MSC's"	Aug 2007	Redwood: "We will Turn Back the Clock Entirely on IR35 and MSC"

2008 - IR35 History

Event	Date	Detail
Datagate Services Ltd wins case.	Jan 2008	Lawspeed IR35 Win Shows Contractors Can Prove Status
MKM Computing Ltd loses case at special commissioners.	Jan 2008	See this article - last paragraph MKM Computing Ltd - Special Commissioners Decision
Dragonfly Consulting Ltd loses £99,000 in IR35 case. Dragonfly subsequently loses appeal.	Jan 2008 Sep 2008	Contractor Loses £99,000 in IR35 Case for Being 'Part and Parcel' Dragonfly Consulting Ltd - Special Commissioners Decision Crucial Dragonfly Consulting IR35 appeal has been lost Dragonfly verdict - “no massive additional exposure to IR35 risk”
First Word Software Ltd wins IR35 Case at Special Commissioners	Jan 2008	Accountax Win IR35 Case For Contractor - First Word Software Ltd First Word Software Ltd - Special Commissioners Decision
Contractor beats HMRC in IR35 case - Larkstar Data HMRC wins narrow victory over Larkstar Data IR35 case in the High Court	Feb 2008 Feb 2009	Contractor beats HMRC in IR35 case - Larkstar Data HMRC wins narrow victory over Larkstar Data IR35 case in the High Court
Contractor loses IR35 appeal - Alternative Book Company Ltd	Jun 2008	Contractor loses IR35 appeal - substitution clause viewed as “window dressing”

2009 - IR35 History

Event	Date	Detail
Official figures showing that IR35 only brings in about £1.5 million each year	May 2009	PCG’s revelation of IR35’s £1.5m per year tax take is (sadly) not the full story
Tilson ruling: Contractors inside IR35 and employment rights Tilson ruling is overturned on appeal Tilson loses appeal.	July 2009 Feb 2010 Nov 2010	Contractors inside IR35 may be able to claim employment rights after landmark ruling Contractor ‘employment’ status clarified as Tilson ruling is overturned on appeal Contractor’s bid for employment rights denied as Tilson loses Tilson v Alstom appeal
Stringer v HMRC: Clients should now be more supportive on contractors IR35 status	Aug 2009	Contractors holiday pay ruling should make clients more supportive on IR35 status
IR35 special report: 10 years that shook the world of UK contractors	Nov 2009	ContractorCalculator publishes 10 year anniversay special about the IR35 legislation containing key insights from 10 industry experts.

2010 - IR35 History

Event	Date	Detail
PCG lobbying gains contractors Tory commitment to “review” IR35	Mar 2010	PCG lobbying gains contractors Tory commitment to “review” IR35
Larkstar leaves grim legacy for contractor IR35 status, despite HMRC closing case	Apr 2010	Larkstar leaves grim legacy for contractor IR35 status, despite HMRC closing case
Contractors cheering “staggering” Novosoft IR35 ruling are likely to be disappointed	May 2010	Contractors cheering “staggering” Novosoft IR35 ruling are likely to be disappointed
IR35 review promised by new Office of Tax Simplification (OTS)	Jul 2010	OTS review of IR35
Free online employment status test launched by ContractorCalculator to enable contractors to evaluate their IR35 status	Aug 2010	IR35 Test for contractors
Amendments to IR35 unlikely until April 2012 says expert	Sep 2010	Amendments to IR35 unlikely until April 2012 says expert
Employment rights denied - Tilson loses appeal	Nov 2010	Employment rights denied as Tilson loses Tilson v Alstom appeal
ContractorCalculator publishes IR35 solutions series: Review of current legislation and future options	Dec 2010	IR35 Solutions series [5 parts]

2011 - IR35 History

Event	Date	Detail
Disguised employment (IR35) crackdown launched in USA	Jan 2011	Disguised employment (IR35) crackdown launched in USA
Tribunal win for MBF Design Services confirms importance of MOO MBF Design Services v HMRC – key facts from the case	Jan 2011	IR35 Tribunal win for MBF Design Services confirms importance of MOO MBF Design Services v HMRC – key facts from the case
ContractorCalculator publishes IR35 Solutions Whitepaper	Jan 2011	IR35 Solutions: Review of the current legislation and future options
IR35 Review by OTS: suspend or enforce IR35 better	Mar 2011	OTS says suspend IR35 or enforce it better, then merge income tax and NI
Budget: IR35 to be "better administered" - not abolished	Mar 2011	Budget document reveals IR35 is to be "better administered"
ECR Consulting wins IR35 case after five-year battle	May 2011	ECR Consulting wins IR35 case after five-year battle with HMRC
Marlen Ltd. wins IR35 case against HMRC Contractor pursued by HMRC despite failing all key employment tests	July 2011	Marlen Ltd. wins IR35 case against HMR Marlen IR35 case: contractor pursued by HMRC despite failing all key employment tests
IR35 victory for Primary Path Ltd against HMRC HMRC was predestined to lose case offering important lessons	July 2011	IR35 victory for Primary Path Ltd against HMRC HMRC was predestined to lose case offering important lessons
Partial victory for JLJ Services v HMRC Contractor avoids £141,000 tax bill with partial victory in IR35 tribunal ruling Key facts overlooked in JLJ Services ruling	Dec 2011	IR35 ruling: Partial victory for JLJ Services v HMRC Contractor avoids £141,000 tax bill with partial victory in IR35 tribunal ruling Key facts overlooked in JLJ Services IR35 ruling: contractor ‘sets record straight’

Updated: Wednesday, December 28, 2011

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External internet links

HMRC IR35 Press Release

Press Release

Modified Approach

Welfare Reform And Pensions Bill

F S Consulting Limited Vs Mccaul

Lime IT Vs Justin

Synaptek Vs Young

Usetech Vs Young

Cable And Wireless V Muscat

Island Consultants Ltd V Revenue & Customs

PCG

PCG Wins Case For Mike Ansell

Fears Over Muscat Bite

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