Key IR35 ruling snippets: when HMRC took my ECR Consulting to court

Elaine Richardson picks 10 parts of the IR35 judgment that were key, telling, or memorable, including some she’d rather forget. 

What isn’t in the IR35 ruling against HMRC that went in favour of my former limited company is something I’m often asked about – whether the Revenue pressured me to settle, writes Elaine Richardson of ECR Consulting (now dissolved). 

No pressure to settle my IR35 case, not that I was interested in settling 

Perhaps surprisingly for a taxman who’s today widely seen as looking down the back of the sofa for every penny possible, HMRC didn’t pressure me to settle my IR35 case whatsoever. 

HMRC was determined that I owed the full amount (close to £65,000) under the Intermediaries legislation. And likewise, I wasn’t backing down. 

The IR35 cover that was crucial still crosses my mind… 

In fact, had I lost my appeal at the First-Tier Tribunal in February 2011, I probably would still be fighting today. That’s assuming the IR35 insurance policy I’d fortunately taken out would’ve permitted me to persist. 

What is in the IR35 judgment that vindicated me as outside IR35 while working for Vertex Data Science is mainly what I want to focus on here. Paradoxically, that’s also what I’m asked about a fair bit. So, I’ll cover it here exclusively for Kingsbridge in this third instalment. 

And perhaps understandably so. 

‘Work being done was similar to employees’ work’ 

When people see sentences in the ECR Consulting v HMRC judgment such as “the work being done was similar to that carried out by the employees of VDS” [35], there’s usually the odd question or two about how I managed to beat IR35! 

Firstly, it’s important to understand where the burden of proof lies in an IR35 tax tribunal… 

With IR35, you’re not ‘innocent until proven guilty’  

It’s NOT the case for the taxpayer of ‘innocent until proven guilty.’ 

Rather, the burden of proving yourself to be outside IR35 – i.e. not caught by the Intermediaries legislation – is entirely on you. (N.B. I’m referring here to ‘old’ IR35 and it’s the rules of 2000 that my case was under). 

To achieve that burden of proof at a high level, a key element is to be seen as operating as a business. 

In my case, I showed I was operating as a business by the number of clients I had been contracted to ‘for services’ (not ‘of service’). And also helpful for this ‘in-business’ operation, was the overlapping nature of several of these commercial assignments. 

Want to stay outside IR35? Collect ‘in-business’ badges 

Other recommendations to be ‘in business’ on your own account include maintaining both a dedicated office and a professional website, as I did. 

As the 2025-26 tax year begins, these two ‘in-business’ badges are very common, but in 2005, these two badges weren’t so usual for the average contractor. 

In my case, another helpful ‘outside IR35’ signpost is the very ‘non-employee-style’ way that the contract was obtained.  

Hardly an employee’s way to secure work 

The agent contacted me directly, obtained my agreement, and then simply placed me with the client. The client wasn’t even expecting me when I arrived!  

But VDS was nevertheless thrilled to have another developer.  After one successful contract term, I was extended, but shortly after (due to industry issues) the contract was terminated abruptly. 

Several months later, I was contacted again about working for the same client via the same agent, and I again agreed, although the work wasn’t so interesting or so well paid. 

As a business, I kept and retained my company’s hours 

During both contracts, I maintained my own recording of my working hours. And this bore no resemblance to the standard 7-hour days it was usual to report to the agent for payment.   

The ruling attests: “Richardson produced…her internal time sheets for the time she worked on the project. These had been completed to comply with the European working directives, but bore no relationship to the time records kept by VDS.” [23] 

This self-recording of hours showed that I could (and did) work as I pleased. It also showed that the client, VDS, had no control over this.   

’Not controlled’ and non-control factors 

At point 23, the ruling further states: “The fact that she could work the hours she pleased clearly shows that she was not controlled…in relation to her working practices.”  

The limitations I was under of having to be in the office weren’t deemed to show any right of control – e.g. all work was done on desktop computers for security and the opening times of the office meant it was locked outside of conventional office hours. 

Inside IR35 signposts (what are they and how to avoid)  

Things to be wary of as an ‘outside IR35’ contractor at a client workplace are those things that risk making you look like you’re acting like an employee. 

I’ve already referred to doing similar work to internal staff, and if you do have skills which the client’s employees do not have, then the end-user is evidently paying for specialist skills, which is helpful to show a lack of control. 

Financial Risk 

Financial Risk is also an IR35 factor that HMRC tries to leverage. 

In my case, it was tabled at the hearing that I took “no financial risk” [26]. The Revenue’s legal representative argued that because I didn’t have to buy any equipment to carry out the work, well, this somehow pointed to ‘inside IR35’. 

Similarly, HMRC tried to argue that I had “no opportunity to carry out any other work” during the time I worked for VDS. 

FTT judge David S Porter wasn’t sympathetic to these attempts by HMRC to engineer an ‘inside IR35’ appearance. But they’re interesting as they show you where the Revenue will try to find perceived cracks in your IR35 defence. 

Employee forms, events, and procedures are best left to employees 

But it’s the little things too. 

Don’t use end-user ‘holiday booking request forms’ – clearly designed for employees – and take care to decline a free invite to the Christmas party. 

Throughout the course of your ‘outside IR35’ contract, remember that asking for permission is never a good idea. You take holidays when you want, you don’t ‘ask’. 

Be professional but don’t just be a ‘no person’ 

But be sensible. For example, as an IT contractor, it’ll likely be necessary to use the client’s processes for development/implementation-based details, like checking out code or implementing changes. 

In my case, the ruling observes: “As the information was sensitive, VDS did not want information either taken off the site or downloaded on to her [Richardson’s] equipment at home” [27]. 

Outside IR35 signposts  

At my IR35 hearing, the key statement I believe secured my ‘outside IR35’ status was made by VDS. It relates to Mutuality of Obligations, but it’s a statement that nicely supported the wider picture of how I operated as a business. It reinforced how I was simply a ‘resource that can do the work’. 

“VDS were not concerned who did the work so long as they were suitably qualified. They appear to have been content to leave the choice of operative to [the agent]”. [26] 

This statement, combined with the many details showing I was in business on my own account, is what I believe swung the IR35 decision my way.  

Performing as a business  

On ‘in business’, note 28 of the ruling: 

“In Market Investigations Limited v Minister of Social Security [1969] 2 QB Cook J said the test to be applied is; ‘Is the person, who has engaged himself to perform those services, performing them as a person in business on his own account? If the answer is Yes then the contract is a contract for services. If the answer to the question is No then the contract is a contract of services.’” 

The ruling adds: “ECR is in business on its own account. Miss Richardson produced to the Tribunal copy business cards and company stationary. ECR operates from a dedicated business area at her home. It has [a] company domain and website. ECR advertises its services and is a member of the PCG. It has retained reserves and invested in development and has over the years taken on fixed price work for a variety of clients.” 

Battling IR35? Don’t forget your paintbrush 

Later, the FTT concluded that “in ‘painting the picture’ it is clear to us” that ECR Consulting Ltd is a “genuine business” and therefore “not a target of the IR35 legislation”.  

This finding, at 40f of the judgment, represents the 10th part of the ruling that I’ve highlighted here as key, telling, or memorable in my fighting HMRC under IR35 of 2000, and winning.  

In short? Wield a big paintbrush. Know when not to ask. Know where to be professional. And know when to abide by the implementation or process side of your ‘outside IR35’ role. But at all (all!) times, operate as a stand-alone business. 

How Kingsbridge can help 

Navigating IR35 legislation and ensuring compliance can be challenging for contractors and businesses alike. At Kingsbridge we offer tailored support, including expert guidance on IR35 status assessments, compliance strategies, and risk mitigation. Our team is dedicated to helping contractors and businesses understand and adapt to the evolving tax landscape. 

We also offer a range of flexible business insurance options to support contractors, including Professional Indemnity, Public Liability, and Employers’ Liability cover, as well as add-ons like Cyber Insurance and Director and Officer’s Liability. 

To find out more, get a quote or contact us today.