Crucial Dragonfly Consulting IR35 appeal has been lost

The crucial IR35 test case for all contractors has been lost by Dragonfly's John Bessell, leaving him with a huge tax bill and the contracting sector with an even bigger headache.

Dragonfly Consulting now faces a bill of at least £99,000 from HMRC for unpaid taxes and National Insurance Contributions, with further penalties possibly to be imposed. The reason is that its director and shareholder, John Bessell, has been proved by HMRC to have been within IR35 during his contract with client The Automobile Association.

Supported by the Professional Contractors Group, Bessell fought HMRC's judgement and the case finally went to the High Court in June for a ruling, which has just been made.

Disaster for IR35 defences

The Honourable Mr Justice Henderson agreed with the original Special Commissioners? conclusion that Bessell's IR35 defence was weak. Despite paying for training and equipment, Bessell's business Dragonfly Consulting was considered an intermediary, with Bessell falling within IR35.

This ruling puts many contractors? IR35 defences on the back foot and potentially might shift the emphasis of prior case law and rulings that supported the arguments put forward by Bessell's defence team.

The consequences of this decision could have a major impact on the supporting case law that many contractors and their advisers use to defend against investigations by HMRC.

ContractorCalculator will be running a series of analysis articles on the Dragonfly Consulting case to assess what this landmark ruing means to the contracting sector.

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