An IR35 case, involving Netherlane Limited, which was heard in the middle of December at the Special Commissioners has been lost. There was criticism that the case was 'short of real evidence' and that much of the efforts in the freelancer's case were 'misdirected'.
Netherlane was providing IT services under a series of six month contracts involving the support and maintainence a computer system for NPI Limited.
The Special Commissioner Dr John F. Avery Jones, explained the reaons for finding Mr Renshaw (Netherlane Ltd) caught by IR35. He said:"Standing back and asking myself would Mr Renshaw be an employee under such a hypothetical contract, the factors that I consider are important in the present case are:
that he was the person in charge of a team in the sense of having management responsibility for the team, and in turn he was regularly reporting to a manager;
that he was carrying out continuous support and maintenance work rather than a specific assignment;
that he was paid a daily rate and could not therefore earn more by working longer hours;
that he did not work for other clients;
and that the arrangement would be terminable on four weeks' notice, all of which point towards an employment relationship.
"Other factors point away from employment, such as the absence of any usual employee fringe benefits (although in practice he had a normal holiday entitlement), and the method of payment against invoices and work sheets.
Some other factors do not seem to me to be important to this question, such as the provision of equipment, and the lack of control over how he did his work.
....I consider that clearly he would be an employee....
Dr Avery Jones - Special Commissioner
"Weighing these all up I consider that clearly he would be an employee. In coming to this conclusion I am fully aware of the different risks involved. Mr Renshaw had absolutely no security at the end of each six months term and the reason that his contract was renewed was no doubt because he was good at his job. But in return he was paid more although against this he received no fringe benefits.
Dr Avery was critical of the presentation of some areas of the case, which he complained was 'short of real evidence'. He said that the Revenue was well prepared and that Mr Robertson (for Netherlane) 'had put in a tremendous amount of work in preparing the case.' He added: "In spite of all this I regret to say that I thought that much of the efforts on the Appellant's (Netherlane) side were misdirected.
The Special Commissioner thought he had been given a survey of employment law rather than a detailed description of the type of work done.
He said:"What was required was oral evidence to put some flesh on the upper level contract. That would be necessary in any appeal but here there were suggestions that NPI were using an old form of contract that did not reflect the true position and therefore I was being asked to pay attention to an upper level contract dated 15 September 2002 on the assumption that there was an earlier version that could not be found."
There was some deabte about who was responsible for finding or providing the information. Mr Robertson made a case that it was the Revenue's responsibility to obtain all the facts themselves.
However, Dr Avery described this contention as 'a misunderstanding of the law'. He said: "It is not for the Revenue to go looking for facts that are in the taxpayer's knowledge, particularly so in this case when Mr Renshaw declined to attend an interview (as he is perfectly entitled to do)."
The appeal was dismissed.
Published: Friday, January 28, 2005
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