A recent High Court ruling has provided a precedent that individuals who offer their services to third parties as freelancers may be pursued by HMRC to recover tax as if the freelancer was an employee of the organisation that they were/are providing work for.
In short, an IT freelancer was providing services to a well known motoring organisation through his company - a common mechanism for the IT industry and most are aware of the IR35 rules introduced some time ago by the Revenue. He had little other income and was held by the Special Commissioner of HMRC to have been integrated into the company's business and had a role similar to a professional employee. On that basis he had to account for tax and National Insurance as an employee, amounting to some £99,000.
On appeal, the High Court affirmed this view based on the facts of the relationship, seemingly ignoring the parties intentions and the contract agreed between them.
As a result, the individual was liable to pay £99,000 tax and national insurance that he would have had to pay as an employee.
We have yet to see the full judgment on this case but the effect of the judgment is likely to worry a number of freelance IT,and other, consultants.