An IT contractor working through an agency on a government contract has won a legal battle against Her Majesty’s Revenue and Customs.

Yesterday, a contractor represented by IR35 specialist, Qdos Contractor, won his First-Tier Tribunal Chamber IR35 case against the HMRC.

The contractor, Ian Wells, provided business analyst services through a personal service company (Jensal Software Limited), via an agency (Capita Resourcing Ltd) to the Department of Work and Pensions.

The hearing took place between 4-6 October 2017, and yesterday, Judge Jennifer Dean decided Wells' contract belonged outside IR35, primarily due to the absence of a sufficient degree of a right of control over Jensal's working methods. The judge also disagreed with HMRC's interpretation of mutuality of obligation and the right of substitution.

Qdos Contractor stated that the case casts huge doubts over the Government's ability to police IR35.

Seb Maley, Qdos Contractor CEO, commented: "Despite HMRC implementing and enforcing the rules, this verdict shows they can't accurately assess a contractor's IR35 status. The Government is serious about clamping down on what they believe to be non-compliance, but worryingly, can't recognise whether a contractor belongs inside or outside IR35.”

Fiona Coombe, SIA’s Director of Legal and Regulatory Research commented “this decision is only a First Tier Tribunal decision, so is not binding on HMRC in relation to other cases, which at this level are decided on the facts, rather than the law. However, the Judge’s comments call into question HMRC’s legal interpretation of IR35, and unless there is an appeal to a higher court this will continue to create uncertainty for contractors. This is also a concern for employers, particularly in the public sector, but also in the private sector, if the Government pushes ahead with their suggestion to extend the off-payroll regulations to the private sector.”