Contractor Phil Winfield did not have a lucky escape when HMRC dragged him, and his limited company Primary Path, through eight painful years of an IR35 investigation culminating in a tribunal. It was the decision maker(s) within HMRC who decided to waste huge sums of taxpayers’ money on a case it had no chance of winning, who got away with it.
When the full ruling and analysis of the Primary Path case was published, it was clear that HMRC had no chance of winning from the outset. Winfield failed all three of the key tests of employment: control, substitution and mutuality of obligation. There were substitution clauses mirrored in upper and lower level contracts and he was so specialist in his field he could not possibly be controlled.
Winfield then ticked nearly all the boxes you can possibly tick to demonstrate that he was in business in his own account: financial risk of non-payment and fluctuating pay rates; simultaneous clients; a speculative IT development project; insurances; membership of professional bodies; and investment in marketing.
Yet despite this overwhelming evidence to the contrary, someone within HMRC decided to proceed with an investigation that lasted eight years, and was then presumably backed up by more senior managers to continue the investigation. They even chose to ignore, or suppress, key evidence. Where are they now, and why did they choose to waste so many resources chasing someone who was so obviously not inside of IR35?
The sad fact is that the HMRC decision maker who determined eight years ago that Winfield was in the frame for IR35 has probably got away with this appalling waste of taxpayer funds. There is unlikely to be opportunity to reprimand the individual(s) concerned, yet they surely deserve some punishment for throwing away our money, clogging up the legal system and putting an innocent taxpayer through eight years of hell.
But more importantly, there will be no opportunity to understand what failings in HMRC’s decision-making processes led to such an appalling mistake being made and then pursued. It will not be possible to take any lessons forward and apply them to the new HMRC processes being created through the work of the IR35 Forum. For surely any new processes must not allow for such a mistake as the Primary Path case to happen again.
Based on the two sets of minutes published by HMRC about IR35 Forum meetings, a root and branch review of IR35 processes and HMRC’s operational strategy is underway. This is potentially very positive news, but only if HMRC is prepared to examine what has gone before and learn from it, even though the individuals responsible may have left the organisation.
And any new processes must allow for a level of accountability within HMRC that was clearly lacking in Winfield’s case. Yes, individuals within any large organisation should be protected from abuse and physical harm. But equally, taxpayers must be protected from overzealous and maverick public servants who, if they have failed in their duty to the public, must be held accountable.