An IT contractor who received an IR35-related £70,000 tax bill by HM Revenue & Customs (HMRC) has had his appeal about the case dismissed by a tribunal judge for a second time.
Project manager Robert Lee received a £70,000 tax demand about a series of IT-related outside IR35 contracts he completed for Nationwide Building Society between n 2012 and 2015, delivered through his limited company Northern Lights Solutions.
However, HMRC claims the way Lee worked with Nationwide meant his engagements should have been classified as inside IR35, making him liable to pay the same National Insurance Contributions (NICs) and Pay-As-You-Earn (PAYE) tax as a permanent employee would.
Lee initially attempted to challenge HMRC through a First-Tier Tribunal in February 2020, but his appeal was dismissed. He was then granted permission in July 2020 to lodge another attraction, which paved the way for a two-day Upper Tribunal hearing in May 2021.
The outcome of that hearing has now been made public. The Upper Tribunal judge confirming this second attempt at an appeal by Lee has also now been dismissed on various grounds, including the high levels of control that Nationwide had over how Lee worked during his engagement.
Another reason why the appeal was dismissed is that the tribunal disputed the claim that Lee had a natural right of substitution, which is considered a key determinant of whether a contract is outside IR35 or not.
In an outside IR35 context, contractors should demonstrate that their end-client is not solely reliant on them to deliver the services they are being contracted to provide. A substitute with the same skills and experience could be appointed and step in if needed.
Evidence shared in the tribunal notes suggests it would not be viable for Lee to “send someone else to do the work” because they would not “get through security, they would not have a laptop nor knowledge of the work. The reality was that it was not going to happen.”