Contractor contests continue: uncertainty bites back at HMRC
04/07/2022Indigo Group
The line between self-employment and what it means to be an employee is no less a blur after HMRC itself became the latest to fall foul of the issue.
Warnings a floodgate situation could be pending gathered pace this week after HM Revenue and Customs were forced to settle with one of its own contractors in a row over holiday pay.
Business Development Consultant Susan Winchester lodged a claim at Central London Employment Tribunal for £4,200 in unpaid holiday against HMRC and four other parties.
Her argument? Being considered a worker for tax purposes but not being given crucial workers’ rights in return is unfair.
Freelance – says who?
IR35 rules passed in April 2000 mean freelancers operating as a personal services company for a third party regularly (as employees would) must pay tax and national insurance as if they were employees.
At first, the decision on whether IR35 applied to a freelancer was theirs, but the law changed in April 2017 requiring public sector organisations to determine contractor tax status on their behalf instead.
HMRC hired Winchester as SJW Marketing Solutions in 2016 and, when the rules changed in 2017, determined IR35 should apply after using its Check Employment Status for Tax tool. As such, Winchester subsequently moved onto agency payroll.
Winchester argued that, as an agency worker, she should, therefore, have been entitled to holiday pay just as an HMRC employee would be, with both parties settling on the day the tribunal was scheduled to begin.
What this case means for others
Gig economy representatives are using phrases like ‘game changer’, ‘catalyst’ and ‘body blow’ to describe what is widely regarded to be a landmark moment for company/contractor relations.
Their argument? If HMRC is capable of falling foul of the rules then how many others are set to follow suit?
To make sure you’re not one of them, contact us.
Read more about this latest ruling in the press here:
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Susan Winchester
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