A public sector IT contractor Ian Wells won the case against the IR 35 over his working arrangement on the Department for Work and Pensions' Universal Credit project between 28 May 2012 and 4 April 2013 of £26,000.
Ian Wells, Director of Jensal Software Limited, which provides business analyst services took a project via Capita Resourcing Ltd of DWP and PUC.
HMRC demanded from Wells an income tax of £14,658 and National Insurance Contributions of £12,011, the figure which he would have paid in taxes if he was effectively employed by the department, the reason of this was the contract came under the scope of IR 35 because he was engaged continuously for over 10 months, and was obliged to turn up for work each day and worked the core hours of 8am/9am until 6 pm.
Judge Jennifer Dean heard the case between 4-6 October 2017 and ruled that all elements of Wells' contract pointed towards him being an independent contractor and not an employee.
Summary of her verdict was: "Looking at the overall picture and making a qualitative assessment I am satisfied that the relationship is consistent with a contract for services, not a contract of service.
"In reaching this decision I have made a value judgment on the features in this case; some of which are neutral and some which provide a more compelling indicator that the hypothetical contract would be one for services."
The government is strongly implementing compliance with the IR35 legislation from the individual contractor to the public body or recruitment agency. It hoped to raise £185m for 2017/18 by bringing public sector contractors within the scope of the legislation.
Qdos Contractor, which acted on behalf of Wells CEO stated: "Despite HMRC implementing and enforcing the rules, this verdict shows they can't accurately assess a contractor's IR35 status".
However, this case is a wakeup call for HMRC to work more vigilantly as the government is going through a consultation of ensuring private contractor or self-employed people pay their due share of taxes.