As we bid farewell to 2024, it’s time to reflect on what’s been a lively year in the world of IR35. With contractors and engagers battling through case law twists, political changes, and HMRC’s increasing boldness, there’s been no shortage of drama. Let’s dive into this year’s highlights and the lessons they bring, before looking at what you need to prepare for in 2025.
A year of high profile case losses
It’s been a rough year for contractors in the courts. Stuart Barnes, Neil McCann, and Barry Cowan all lost their IR35 appeals, highlighting the enduring importance of robust contracts. Meanwhile, Adrian Chiles continues his decade-long saga with HMRC, with his case remitted back to the First-Tier Tribunal. HMRC’s 2024 Supreme Court win in the PGMOL case reinforced key principles around mutuality of obligation (MOO) and control, making defending IR35 cases even tougher.
But it wasn’t all doom and gloom. The case law around “in business on one’s own account” (IBOOA) still offers glimmers of hope for contractors who can prove their independence. Kaye Adams’ win in 2023 continued to resonate, reminding us that demonstrating diverse income streams and genuine business activity can tip the scales in the right direction – though it’s far from a silver bullet.
A new Government, same old IR35
With Labour now in power, many hoped for changes to the Off-Payroll Working Rules. Instead, 2024 has proved that political promises rarely survive contact with the real world. While IR35 reform was conspicuously absent from the new government’s agenda, the PAC (Public Accounts Committee) slammed the rules for deterring businesses from engaging contractors. Contractors can take some solace in this criticism, but for now, it’s business as usual
Lessons learned from 2024
MOO is here to stay: The PGMOL decision firmly established that MOO exists in any work-for-pay contract. Contractors should stop relying on this as a defence and focus instead on other factors.
Control matters more than ever: Even when a client doesn’t actively supervise work, contractual rights of control can sway decisions in HMRC’s favour.
Contracts and working practices must align: As Stuart Barnes learned the hard way, good working practices mean little if the contract doesn’t reflect them.
Non-compliance can be very costly: 2024 wasn’t just a year of contractor losses; it also saw public sector organisations facing the consequences of non-compliance. HMRC handed out significant fines to several public sector bodies for failing to take “reasonable care” in their IR35 determinations.
One of the highest-profile examples was HS2, whose failure to correctly assess contractors resulted in a hefty penalty. For engagers, this underlines the importance of conducting proper status assessments and documenting them thoroughly. Contractors should also remain vigilant, questioning any determinations that seem rushed or poorly evidenced.
What’s coming in 2025?
The IR35 landscape is unlikely to settle anytime soon. Here’s what contractors and engagers should keep on their radar:
More HMRC challenges: HMRC continues to ramp up compliance activity, appealing more cases and winning in higher courts. Expect this trend to continue.
Undecided cases: Keep an eye on ongoing cases, including Adrian Chiles and PGMOL, for further clarification on employment status tests.
Compliance is key: With HMRC focusing on procedural errors, ensuring contracts, working practices, and assessments align, and undertaking robust and thorough assessments will be more important than ever.
Focus on reasonable care: Engagers must demonstrate thoroughness in IR35 determinations. For contractors, this means double-checking determinations and seeking corrections if needed.