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The High Court has ordered that the General Commissioners re-hear an IR35 case originally won by the taxpayer.
The case of HMRC versus Larkstar Data and its owner, Alan Brill, must be reconsidered because the General Commissioners misdirected themselves in law, ruled judge Sir Donald Rattee.
In August 2000, Larkstar entered into a series of agreements with Technology Project Services International (TPS), a company acting as an agency for the engagement of contractors by Matra Bae Dynamics UK (MBDA).
The provision was that of computer consultancy services to MBDA. There was no direct contract between the company and Alan Brill, the person whom Larkstar provided for the purpose of fulfilling its contractual obligations to TPS.
HMRC took the view that the arrangements were such as to fall within anti-avoidance provisions contained in the IR35 legislation, and the department served notices of determination and decision on Larkstar.
The General Commissioners, however, rejected the view of the Revenue that IR35 legislation applied to the case.
But they failed to consider authorities to which HMRC referred them, and so they did not take all arguments into account, said Sir Donald, who upheld only one of the taxman’s four grounds for appeal (which was enough to have the case re-heard).
The Larkstar case illustrates the dangers of taking cases to the General Commissioners, said John Brazier of the Professional Contractors Group, the representative body for freelancers.
Doing so ‘increases the chances of this kind of error compared to hearings before the Specials,’ he added.
