Recommendation 13

We asked whether HMRC’s pursuit of some IR35 cases through the courts was fair and proportionate. HMRC said it will always try to resolve disputes by agreement but that some litigation is inevitable. HMRC said it does not underestimate the stress involved when a taxpayer is facing potential litigation. It has published a litigation and settlement strategy that sets out when it will pursue a dispute through litigation.42 It said that much of the well-publicised litigation relates to cases before the reforms, and that around 70% of recent employment status disputes have been ruled in favour of HMRC.43 HMRC reports that IR35 litigation is rare, with only 22 cases heard at the First-Tier Tribunal since 2017.44 HMRC said through this litigation it has been testing the employment status rules and how they can be applied.45 It said it may need to update its guidance and tools on the basis of the courts’ judgements.46 However, HMRC did not accept that its guidance was not clear.47