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IT Consultant wins IR35 ruling

OUT-LAW News, 05/11/2003

IT consultant Roger Tilbury has won a case against the Inland Revenue over the controversial IR35 tax. The Inland Revenue had argued that he was a disguised employee of the Ford Motor Company and therefore subject to the tax, but the Special Commissioners ruled on Monday that this was not the case.

The IR35 legislation came into force in April 2000. It treats small businesses in the knowledge-based sector as "disguised employees" for tax and National Insurance purposes, thereby preventing them, argue its critics, from operating on similar terms to their larger competitors.

In this case Tilbury had worked at Ford for nine years, and held a contract with Compuware, to which Ford had outsourced its application management centre. It did not make him a "disguised employee" though, said the Commissioners.

In delivering his verdict, Mr Stephen Oliver QC noted that Tilbury's consultancy company had had the "qualified right" to send a substitute but had never exercised the right. Nor was Ford able to tell Tilbury how to carry out the work.

These points, and the fact that Tilbury was not part of Ford's business or undertaking were, in the opinion of the Commissioners, inconsistent with employment. No tax was therefore due under the legislation.

Tilbury was supported by the Professional Contractor's Group throughout the case, and in a statement issued by the group said:

"I'm delighted to have won, and relieved that it's over. It has taken more than two very stressful years to get to this point, during which time I had to put all investment in my business on hold, for fear of tying up funds."

Commenting on the outcome, PCG chairman Simon Griffiths said:

"We're very pleased with the judgement. This significant case re-establishes the core principles of defining an employment relationship based upon the actual contract and the facts, rather than trying to construct a notional contract intended to imply employment."