Long running contractor IR35 case ends as HMRC settles for peanuts

A long-running IR35 status case between HMRC and Larkstar Data Limited, an IT contractor company, has ended after the tax authorities agreed not to pursue the directors in return for just £129.79.

The directors of Larkstar, Alan and Jean Brill, had been in dispute with HMRC over their 'employment status' since 2003.

Over the past seven years, the directors have been forced to undergo both a Tribunal and High Court hearing.

In a high-profile move within the contracting industry, the High Court referred the case back to the General Commissioners early in 2009.

The dispute only came to an end following a subsequent hearing. HMRC agreed to stop pursuing Larkstar Data for any income tax and NI contributions that might have been owed if the directors were indeed 'disguised employees'

In return, the tax authorities are entitled to just £129.79 from the company - all that remains after Alan Brill settled outstanding liabilities prior to taking retirement from the contracting profession.

We suspect that the costs to the taxpayer for court and legal costs alone will have run into six figures over the course of the dispute, doing nothing to quieten the many critics of the IR35 rules.