HMRC loses another IR35 appeal case

Accountants may be interested to learn that HMRC lost another IR35 appeal case last month.

This case surrounded the employment status of Philip Winfield, an IT contractor trading under the company name Primary Path. Winfield worked on two assignments for GlaxoSmithKlein between 2001 and 2003. The contracts, which involved him working on database interface projects, were arranged by two intermediary agencies.

HMRC decided that even though Winfield’s contractual arrangements were with intermediary agencies, his employment came under the IR35 regime. In October 2007, he was contacted by the Revenue and informed that he owed income tax to the value of £25,000 and also National Insurance because he had been in a relationship with GSK as an employee.

Back in 1968, Judge McKenna laid down employment status criteria in the Ready Mixed Concrete case and the IR35 tribunal referred to these when making its decision. The criteria include mutuality of obligation, the degree of personal contact between the two parties and other conditions that could show a service contract was in place.

Edward Sadler, the First Tier Tribunal judge presiding over the case, consider the contracts that Primary Path had signed, the agencies concerned in the arrangements and the role played by GSK. Furthermore, he looked at the conditions that surrounded the work to see if they created a hypothetical contract that defined the engagement.

HMRC has been unsuccessful in a few IR35 cases recently. Maybe it really is time to do away with this onerous regulation and devise a system that is easy for everyone concerned to understand!

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