Contractor wins IR35 tribunal decision

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John Stokdyk
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An engineer working on a contract basis for Airbus UK won his appeal against HMRC’s determination that he should be taxed as an employee under IR35 rules rather than as self-employed.

Following a hearing in Bristol in November, the First Tier Tribunal found in favour of MBF Design Services, the trading company operated by Mark Fitzpatrick. In February 2009, he appealed against HMRC’s decision that his employment status for the years 2001-07 fell within the terms of the Social Security Contributions (Intermediaries) Regulations 2000 and Income Tax (Pay As You Earn) Regulations 2003.

In April 2003 Airbus took on Fitzpatrick and his company MBF under a contract via intermediaries GED-Sitec and Morson Human Resources at an hourly rate that increased if he worked more than 35 hours in a week. The tribunal noted that the “request for services” to which the contract related included a seven-day notice period and a stipulation that substandard service or attendance would give Airbus a legitimate claim to withhold payment.


The tribunal notes that the contract agreed between Morson and Airbus named 53 individuals and appeared to be based on one normally used for the purchase of goods, with Fitzpatrick’s “quanity” indicated as 42,500 hours at his usual hourly rate.


The third contract between Morson and Airbus also included a clause setting out the client’s right to immediate cancellation of the contract, which was crucial to the tribunal’s decision that the terms were inconsistent with the mutuality of obligation that exists between employee and employer.

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By chEEK
30th Jan 2011 18:24

It's about time

For the manager to admit that his evidence was written by HMRC and for the judge to find his evidence unimpressive...surely some action needs to be taken here? It seems to me that this case needs further investigation to determine whether or not the people involved at HMRC and the manager at Airbus should face disciplinary and legal action (perjury /suborning perjury) .

The question is... who has the right/responsibility to take action? The freelancer, the judge or the police? Or can any concerned citizen point this out to the police?

I certainly have concerns over the behaviour of HMRC in these cases. Once the tide of IR35 cases turned against them, I have not been happy to see HMRC change tactics to what seems to consist of twisting the arms of intimidated permanent employee managers to drum up "evidence" such that the outcome of a case is... basically whatever they would like it to be without reference to the law or the rights of individuals. And certainly nowhere near what one would call reasonable in the context of a public institution in a (supposedly) free democratic society.

Surely these people, as public servants, have a higher degree of responsibility to the individual citizen and to society in general - IMO they need to move past the days when their role was to whip the peasants for as much tax as possible (usually to fight a war somewhere *cough* Iraq *cough*) and get into the 21st century... ar at least the 20th would be a start.

As a society, surely we cannot simply look past this kind of behaviour by HMRC?

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31st Jan 2011 10:52

Quite right chEEk.

What's even worse is such actions (in an increasing number number of areas) are effectively making fraudulent and deceitful behaviour the norm at HMRC. By extension, it would therefore be equitable for fraudulent and deceitful behaviour to be the norm for the taxpayer...

Whether some people at HMRC are too retarded to be able to realise this, or are simply being as vindictive and spiteful as possible whilst the organisation crumbles around them is a moot point; there cannot be another reasonable explanation and none is acceptable.

Nevertheless, congrats to Matt & the team on another victory. And some well-deserved freedom from stress for the poor taxpayer.






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By shacht
31st Jan 2011 10:57


Who else would prepare the witness statement? The guy was HMRC's witness, HMRC presumably talked to him and then typed up a witness statement. I don't see that as improper. It's more likely that the statement was inaccurate or rubbish.


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31st Jan 2011 11:12

HMRC and witnesses being led by having words put in their mouths

 Who else would prepare the witness statement? The guy was HMRC's witness, HMRC presumably talked to him and then typed up a witness statement. I don't see that as improper. It's more likely that the statement was inaccurate or rubbish.

 In the few Court cases I have attended the witness would have been charged with contempt of Court (It must be HIS statement on which he can be cross examined) and the "prosecution" severely reprimanded if not having the case thrown out. It is shocking and shows one law for them one law for us.  

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31st Jan 2011 11:42


 Bloody good for the engineer.  Well done on behalf of the masses.  How many other people I wonder have been bamboozled by HMRC into their wrong status.

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31st Jan 2011 12:15

HMRC pursuing lost causes

HMRC seem to be on a vendetta against hard working self-employed people.  We are seen as easy targets whilst major companies are avoiding millions in tax; is it because HMRC do not have the skilled staff to fight the more complex cases?

I am currently being pursued for £300K for 5 years' VAT payments having been advised by HMRC originally in 2006 that I was exempt (I provide medical treatment for addicts).  Having researched a great deal of the Tribunal cases, it is clear to me from the outset which way these others decisions were going to go, and yet HMRC blindly carry on at our expense and with no redress.  My lawyer is going to cost me around £20K-£30K to fight HMRC and the legal advice I have so far is very favourable, but I know I could lose.

My accountant advised me recently that he has seen an increase in 'fruitless' cases where HMRC seem to have lost all sense of reason.  In my case, if I lose, I will have to go bankrupt and HMRC get next to nothing.

As another contributer has said previously, this attitude hardens you against HMRC and you end up putting in every possible (legal) claim for tax deductions you can.  I know in the past that I have not been as vigilant with many things that I could have claimed for and I'm sure some people will go even further (tax evasion) to get their own back (not condoning this but I can sure understand how it arises). 

Surely HMRC must be losing out in expensive lawsuits and higher individual tax claims?

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By ameli1
31st Jan 2011 13:01

Witness Statement

Evidence proves the facts. Tribunal rules stae that they are to provide for "just and fair" proceedings. The Tribunal can award costs against one side or the other.

It is the facts contained in the witness statement that are important and crucially the witness being called to attest to those facts and of course then face cross-examination by the other side (appellant's representative).

If HMRC wrote the statement then so be it, so long as the witness was prepared to sign it off as true. If the evidence given by the witness under cross-examination was either factually derelict or even unreliable then the respondents case would be damaged. Correct?

Presumably at the Tribunal HMRC called their witness who read out his/her statement prepared by HMRC. Crucuially, the witness was then presumably cross-examined, so if the evidence was not credible then...oops.

HMRC don's give much regards to the MOO test. They will need to now. I don't think taht this case is particularly ground breaking, just a demo' of the need for a quality fact-find and an understanding of due process which can accelerate proceedings and expose HMRC's case.

Just my view of course.

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31st Jan 2011 14:28

sad stories

That's the problem: some officers (or the system) seems to have an almost religious (ie irrational) belief in their position and totally ignores the facts of the case, which based upon previous case law, they are almost certain to lose. yet they persist. Either out of a sense of vainglory, or stupidity.

My sympathies go to Wingco44; an invidious position to be in.

My real concern is that unless they change their take, take, take attitude and return to a 'customer-based attitude', otherwise honest taxpayers will simply either ignore HMRC entirely or see taking as fair game and the system will implode. Maybe that's what it takes, but I really hope not. It would be ugly.



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31st Jan 2011 19:29

Witness Statements

To be quite candid there is nothing wrong with the prosecution (after all that's what HMRC are when they are pursuing the appeal you have lodged) preparing a witness statement for the person who has agreed to provide evidence against the defendant - namely yourself.

It is for the witness to say whether HIS statement is correct. If he chooses to not to apply proper care in its preparation (namely ensuring that the facts related are accurate and agrees with the oral evidence he has already given) then our problem is not with HMRC but the witness. It might seem from this that I am condoning the inappropriate and biased witness statement taking that can be found in the incorrectly operated enquiry. Far from it - I resent supposed professionals employing dubious tactics to win at whatever cost;  however when you have cases like MBF, and that other noteable case of  Mark Andrew Lewis (t/a MAL Scaffolding v Revenue & Customs [2006] where the Special Commissioner commented “The Commissioners appear to have approached their investigations on the basis that there must be an employment relationship between  MAL Scaffolding and the workers there if one looks hard enough. Officers then went looking on that basis and persuaded themselves that they had found that for which they went looking. They have totally failed to persuade me. More formally, I am persuaded on all the evidence and on the balance of probabilities that the usual form of relationship between  MAL Scaffolding and a worker at that time was that of an informal and undocumented verbal contract for services and not any form of contract of service.” HMRC lose far more than the individual case – they also lose credibility.  A dodgy witness statement drafted by HMRC or other unsatisfactory approaches can be usefully highlighted and used to put HMRC off the odd “grey case” and win the day without the need for the expense of a formal appeal.

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By chEEK
01st Feb 2011 03:08

The tone of the OP, however...

... suggested that there was more to it than meets the eye.

 It might be fair enough to do as the police do i.e. to listen to what the witness has to say, write it down and ask them to check and sign it, but the wording of the OP suggested that there was more to it than that particularly when that point was conjoined with the statement that the judge was rather underwhelmed by theis person's evidence.

When you add into the mix the fact that the witness seemed to have distanced himself from his evidence fairly easily... it would seem that the OP deliberately gave the impression that the statement had been cooked up rather than proferred on an entirely voluntary basis.

And that is what needs to be looked into IMO - just how far do HMRC go in writing these statements as they wish they were rather than allow each witness to tell their own story in their own words. It is certainly true that most people are somewhat intimidated by tax inspectors and would easily be leant upon to say what was required.

And that stands to reason - after all, if you've worked with someone fro a few months/years why on Earth would you suddenly volunteer to stictch them up in court and have them lumbered with a massive tax bill on such a subjective assessment as is undertakne in IR35 cases? You just wouldn't do that, unless you relaly hated the bloke for some reason or.... unless you were leaned on?

Perhaps that's a question that more people shoud be asking of these managers in court when they suddenly start singing like canaries... why are you doing this?

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01st Feb 2011 08:57

Cut and Paste

Yes Cheek, it's not the first time that a "set of witness statements" has been clearly done up by cutting and pasting from another witness statement - even getting the odd signature mixed up with the purported witness signing the wrong statement. Of course in that situation you would not expect HMRC - properly reviewing the case - to allow such a case to go to tribunal. Or at least that's my experience in reviewing cases on the good side since 2006. Faults and findings from reviews in prior periods deliberately withheld to protect the innocent.  

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02nd Feb 2011 10:38

Reading to much into this

I think people are reading to much into the rejection of the witnesses evidence, the tribunal stated "While not doubting his honesty", so why are people suggesting there has been something dishonest going on?  Evidence can be rejected because it does not support the arguments, which is my read on the tribunals comments of "the tribunal judges were not impressed with his evidence".

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By chEEK
03rd Feb 2011 00:47

Genuine concerns, I believe

Oh I don't think too much is being read into it at all. "Not doubting his honesty" is clearly at odds with the rest of what was said and (assuming accurate reporting) can be read as something that is said to suggest that it is not the witness himself that the judges see as dishonest (but does not say the same of those who may have pushed him into signing this statement).

Billgilcom seems to accept that this happens - and even claims direct personal experience of it actually happening - but for some reason he would like to consign it to the category of "those naughty old devils at HMRC" rather than a matter for serious public concern. I can only assume that old allegiances die hard.

Bottom line: if an ex-HMRC person says that it happens, then it's reasonable to conclude that it does - therefore there is no question of "reading too much into it", the only question that remains is... what is to be done about it?

Given the apathy here it would seem that the answer is... nothing.

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07th Feb 2011 09:18

HMRC over stepping the line!

This case is worrying at best and damn right scary at worse. I can't see how it is right for HMRC to have written his statement for him, if this is the norm then it shouldn't be. HMRC think and act like they have no one to answer to, if you look through the news stories on AccountingWeb, HMRC appears in so many - and almost every time they are being slated for their inefficiency or a general co*k up. When will something real be done - or do we just have to put up with a useless public body that so often doesn't work! Apologies for the rant - just got off the phone with a very rude HMRC "adviser".


Accountants for Contractors

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