HMRC appears to be on a winning streak in IR35 tribunals, securing several emphatic victories, including at the Upper Tribunal, where decisions set legal precedents. With each win, HMRC tightens its grip on employment status rules, making it harder for contractors to operate outside IR35.
A More Aggressive Approach
In the past, HMRC frequently lost IR35 cases. But today, it spares no expense, employing top barristers even at the First Tier Tribunal. This “win-at-all-costs” strategy raises concerns, as the tax authority sometimes invests more in litigation than it stands to recover. Beyond individual cases, HMRC’s victories influence future rulings, making it riskier for contractors to challenge IR35 decisions.
A Tougher Landscape for Contractors
For contractors, this trend makes securing “outside IR35” roles more difficult. Clients, wary of legal scrutiny, may take a cautious approach to status determinations. Some contractors might even forgo legal challenges due to the high cost and risk of appeal.
Key Strategies to navigate the IR35 landscape:
1. Strengthen Your Contract and Working Practices
Even with sound legal representation, your contract and how you actually work day-to-day must align. Focus on:
- Substitution: Ensure your contract allows for a genuine right of substitution, and be prepared to demonstrate it’s more than theoretical.
- Control: Show that you control how, when, and where the work is done, not the client.
- Mutuality of Obligation (MOO): Minimise any expectation that the client must offer continuous work or that you must accept it.
2. Request Clear and Evidence-Based Status Determinations
If you’re working via an end client under the off-payroll rules, push for:
- A transparent Status Determination Statement (SDS)
- Evidence-based reasoning tied to your specific role, not boilerplate responses
- Opportunities to challenge or appeal the SDS if needed
3. Use IR35 Contract Review Services
Engage professional IR35 contract review services before signing any agreement. These experts can spot red flags and help restructure terms to mitigate risk.
4. Consider Insurance and Legal Support
Look into IR35 tax investigation insurance or memberships with organisations (like IPSE) that offer legal support and representation in the event of an HMRC challenge.
5. Stay Informed and Involved
- Keep up with tribunal outcomes—these shape how status rules are interpreted.
- Join lobbying efforts pushing for reform.
- Participate in consultations or public campaigns when the government signals a review of employment status laws.
6. Diversify Your Income Streams
Reducing dependency on one long-term client helps demonstrate you are genuinely in business on your own account—another key IR35 factor.
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