Dragonfly & IR35

The High Court has now heard the appeal in Dragonfly Consulting Limited v HMRC, and the judgment is expected in the next few weeks. The commissioner's decision, SpC 655, from last year, can be downloaded  here. 

The success, or otherwise, of the taxpayer's appeal will hinge on an examination of the irreducible core of mutual obligations needed for a contract of service to exist. With the taxpayer working in circumstances reflected by many of the commonly adopted pro-forma arrangements for circumventing the personal service company provisions, and with the Revenue more often than not exercising a wilful blindness to the relevance of mutual obligations, we suspect the case outcome will be of wide interest. There will certainly be a considerable amount at stake for the hard pressed Exchequer.

A further appeal can be expected, regardless of who wins on this occasion, and, if nothing else, this might serve to highlight the quite ridiculous, and practically unworkable, state of affairs present in the IR35 rules which are long overdue for abolition in the much needed, but still delayed, overhaul of the taxation of small businesses generally.