Q&A interview with IR35 winner Elaine Richardson: my take on trouncing HMRC

A sit down with HMRC vanquisher, business analyst, and IR35 protection advocate Elaine Richardson, exclusively for Kingsbridge. 

Elaine Richardson won a five-and-a-half-year IR35 battle against HMRC. 

As the director of ECR Consulting Ltd, Elaine was accused by HMRC in 2005 of being a disguised employee for her work at Vertex Data Science. The Revenue demanded she pay £65,000 in employment taxes. Elaine refused and used IR35 insurance to fund a court battle. In May 2011, the First-tier Tribunal threw out the £65k tax demand, ruling: “It is clear to us that ECR is a genuine business and therefore not a target of the IR35 legislation.” 

Following her exclusive guidance for Kingsbridge on how to beat IR35, how to form a winning IR35 defence, and how the ECR Consulting judgment vindicates her, Elaine sat down with us for a Q&A interview.  

This conversation has been edited for length and clarity. 

Kingsbridge: You won your IR35 case at the FTT quite convincingly. Do you think your case highlights flaws in HMRC’s understanding of the IR35 rules and its approach to litigation, and if so, what needs to change?  

Elaine Richardson: I believe HMRC have either:

a) Never understood IR35 as it was originally introduced. The Revenue has come a long from the original point of the 2000 legislation. Remember, the ‘Friday-to-Monday’ scenario it was meant to dissuade, to deter disguised employment? Well, it’s not clear to me HMRC remembers it.

or:

b) HMRC has deliberately misinterpreted IR35, to maximise tax revenue.

Regardless of which of these two scenarios is closest to the truth, I believe some support in addition to IR35 insurance needs to be introduced for those contractors who battle the tax office on IR35. Coming up against taxpayer-funded HMRC simply isn’t a fair fight.

Misunderstanding, interpretation, HMRC reality detachment

KB: Do you believe HMRC’s continued pursuit of cases like yours reflects a misunderstanding of modern self-employment or freelancing?

ER: I’m not sure it is a misunderstanding, more an intent to extract as much tax as possible without worrying or caring about the effect on the individual. Or the effects on the economy.

KB: Was there ever a point during your case [ECR Consulting v HMRC] when you thought HMRC’s interpretation of your working practices was completely detached from reality?

ER: There was never a point during my IR35 case where this was not my opinion.

Pressure, homework, reassuring lawyers

KB: Did you face any pressure from HMRC or others to settle, and if so, what made you push forward instead?

ER: As I mentioned previously [in part three of this series], there wasn’t pressure on me to settle, insofar as pressure from HMRC.

That said, I did repeatedly receive letters from HMRC telling me, in essence, that they had decided that I’d lost the argument over my IR35 status, so I simply needed to pay up.

Probably the most classic case ever of the taxman marking his own homework.

There was one letter from Newcastle Crown Court that particularly worried me for one weekend. Be aware, these nasty things from HMRC have a habit of arriving on a Friday.

But I spoke to my lawyers, who reassured me it was HMRC attempting to extend my IR35 case window because someone on their side had overlooked an important date.

Hindsight, nausea, and a glaring falsehood

KB: In hindsight, is there anything you would have done differently in how the early IR35 investigation was handled, before your case reached tribunal?

ER: No. But it would have been easier if my original legal representative hadn’t had a serious accident and had to withdraw.

That said, the new legal team I got were magnificent.

The team had to quickly come on board and get up to speed, distinctly aware that the case had already been in hand for a number of years.

KB: Was there a moment at your IR35 appeal hearing when your tummy turned because you felt HMRC was making a compelling point against your outside IR35 position?

ER: The ‘evidence’ presented by HMRC’s representative made me almost nauseous.

It was a mixture of what HMRC wanted my contract to be; what an employment contract would have been, and sheer wishful thinking on their part.

At one point, I could not help but gasp at one glaring falsehood that outright contradicted a statement that one of HMRC’s own witnesses had said.

KB: Can you please share that “glaring falsehood”?

ER: Yes. The HMRC inspector told the court that the client required me to work directly, and would not have accepted a substitute, when the client had already stated the exact opposite.

An uncaring client, honest client reps, personal impact

KB: What specific piece of evidence or argument was most critical in turning the case in your favour?

ER: There was one statement made by a senior manager at my end-client VDS that I believe turned the case. That’s not to say we weren’t doing rather well already.

Anyway, the senior manager said something along the lines of, “We didn’t care who did the work, just as long as it was someone who could do it well.”

Curiously, it’s a statement not in the published judgment.

KB: How did you react to end-client representatives who you worked with being called by HMRC to give evidence against you?

ER: Actually, I wasn’t a bit surprised that client representatives were called to give evidence against me.

Even large companies are rather wary of HMRC, and no doubt VDS were advised it would be in their best interests to be on HMRC’s side.

But I’m very grateful that the client representatives were totally honest and open in their evidence. It’s a bit late now, but I would like to express my thanks to them. All client-side staff called by HMRC were honest about my working arrangements.

KB: How did fighting your IR35 case against HMRC impact you personally and professionally?

ER: I was a bit stressed, of that I’m certain!

Having a £65,000 tax bill hanging over you isn’t a nice thing.

But after the initial panic, I think I just became more and more determined that HMRC wasn’t going to win.

I always knew I was running a business, and my confidence in that fact kept me going.

Advice for contractors facing IR35 investigation   

KB: What advice would you give to other contractors facing IR35 investigation?

ER: Things are different now. Remember, I was investigated under the Intermediaries legislation of 2000. So I was investigated before the public sector IR35 off-payroll working rules of April 6th 2017, and before the private sector IR35 off-payroll working rules of April 6th 2021, both took effect.

But actually, I don’t think my advice would be much different.

It’s four things that I think contractors should do:

1. Make sure you have tax investigation insurance.

1. At all times, BE a business. Just to add – it really isn’t hard, just get your mindset right.

1. Get your contracts professionally checked.

1. Make sure you don’t fall into the trap of being “part and parcel” of the end-client organisation.

IR35 insurance misconception

KB: You just mentioned IR35 insurance. What’s the one thing you think contractors don’t realise about IR35 insurance?

ER: I have heard contractors say they think that IR35 investigation insurance covers any potential liability to HMRC. But in my case, and in my understanding of IR35 insurance, such cover covers your legal costs, not any findings against you.

Hell, a sledgehammer, plus today’s monster on steroids (the OPW rules)

KB: Do you feel the time, stress, and cost of defending your IR35 position was worth it, given the potential consequences of losing?

ER: Yes. In fact, HELL YES!  

If I hadn’t won in 2011, I would still be fighting today, assuming my IR35 protection policy would fund such a protracted battle! 

KB: Do you believe the IR35 legislation of 2000 serves a useful purpose, or do you think it needs to be reformed as part of a broader overhaul of the tax system?

ER: I think IR35 in its entirety was, and still is, with the OPW rules, a sledgehammer to crack a nut.

The initial statement from the tax authority was a legislative intent to prevent people from being forced from permanent work and statutory employment rights to contract terms on a self-employed basis, thereby losing their employment rights.

No one would have or did have any argument with that.

But IR35 soon became a monster, and the OPW rules – IR35 reform – have made it a monster on steroids.

Risk, my reasons for closing, and reflections on inside IR35  

KB: Do you think the off-payroll working rules are correct to target clients?

ER: I would rather this was not the case, as I know from experience it has caused some clients to determine on an ‘inside IR35 only’ policy. I can see why. They don’t need to take the HMRC tax risk. And if people are prepared to work inside IR35, the client doesn’t have to.

KB: You have since stopped running your business. Was that a reflection of the IR35 ordeal you went through with HMRC?

ER: No, my IR35 case wasn’t the reason I dissolved ECR Consulting Ltd.

There were two main reasons I stopped running my business when I did.

The first was my client base – financial services. When the off-payroll rules were introduced in the private sector, almost all banks refused to take on limited company contractors except on an inside IR35 basis.

The second reason was the government threatening to change the law relating to the tax payable on monies that incorporated business-owners could take out of a company upon its closure.

My winding up coincided with covid, which was coincidental, but the pandemic further flattened opportunities not to mention the wider economy.

KB: How has your experience of HMRC and coming under IR35 investigation affected how you choose a contract or assess a professional opportunity today, in 2025-26?

ER: As a consultant business analyst, I have never accepted, and will never accept, an inside IR35 contract.

However, my decision not to accept a caught contract has less to do with the tax implications of inside IR35. After all, HMRC liability now sits with the end-client. It’s got much more to do with what I see as the inherent dishonesty that permits an individual to be self-employed for the purposes of employee rights – that is, the individual gets absolutely no rights – but at the same time is employed for tax purposes.

KB: Thank you for your frankness, all your answers, and your time.

ER: Thank you.

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.