April 11, 2018 0

Landmark IR35 ruling : Contractor wins appeal against HMRC

Landmark IR35 ruling : Contractor wins appeal against HMRC

The recent publication of a tribunal ruling in favour of a contractor in an IR35 hmrc case has offered hope to many who are in similar situations.

Appeal number: TC/2017/01591 heard by First Tier Tribunal Judge Ian Hyde, pertained to a case between Mark Daniels and the HMRC.  The HMRC had deemed that the arrangement between Mark Daniels (director and principal employee of MDCM) and Structure Tone Limited constituted a contract of employment and considered it to be within the IR35.

Genesis and Case history

Mark Daniels and his wife were directors and principal employees of MDCM, which provided construction management services to businesses. MDCM entered into a contract with Solutions Recruitment Limited for providing services on the evening shift to STL (Structure Tone Limited). The terms of the agreement did not come with any notice period or benefits. Consequently, being the principal employee, Mark Daniels was engaged in the night shift at a work site in Midlands. The HMRC determined that the terms of the engagement construed a contract of employment for the period from 2012-14 under PAYE Regulations and Section 8 of the Social Security Contributions.

The appellant Mark then filed an appeal against the assessment. The Tribunal heard the appellant and respondent before ruling in Mark’s favour, categorically stating that “control” was essential to prove that the contract fell within the IR35 net. This caused embarrassment to the HMRC considering that it came on the back of other similar cases where “control” was key to determine if contracts were within IR35. Mark Daniels had produced among others, four other similar contracts between MDCM and Solutions Recruitment Limited to prove the nature of services offered.

The appellant submitted orally in court about the nature of his job, and his submissions were substantiated by the finance director of STL, the company that had engaged the services of MDCM through Solutions Recruitment Ltd. The submissions of the appellant and the witness proved that STL did not exercise control over Mark Daniels as an employee.  This went in favour of the appellant and is being hailed as another landmark ruling that promises hope to others who have found themselves at the wrong end of an HMRC IR35 determination. For the appellant, the ruling came as a relief despite the fact that three status factors in the IR35 determination were stacked up against him. Mutuality of Obligation, Substitution and Financial Risk were the other three factors that went against him. However, he managed to emerge victorious with the ruling, despite a Project Manager being on the shift where the appellant was contracted to work on the evening shifts at a construction site.

Read also – Difference between umbrella company and limited company?


Accountants can help review contracts for entities, helping in reviewing the terms of the contract, by itself and in the context of the working practices and procedures in the company that is party to the contract. Rulings of other IR35 reviews in the tribunal are awaited and vindicates the stand of accountants who have stood by clients in claims that contracts were outside the IR35. With the right kind of guidance and support in reviewing and rectifying the clauses and contractual obligations, it is possible for many contractors to find relief from HMRC determinations in IR35 cases.

Find Accountants who provide IR35 Review Services

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