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IR35: UT waits on Court of Appeal MOO decision


Susan Ball and Carolyn Brown explain why the Upper Tribunal (UT) has held back its full judgment on George Mantides Ltd, pending the Court of Appeal decision in the PGMOL case.

20th Aug 2021
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The UT has decided that two of the factual conclusions reached by the first-tier tribunal (FTT) were not supported by the evidence. But the full implications for the IR35 status of the taxpayer remain unclear, as they will be determined following a pending Court of Appeal decision in another case: HMRC v Professional Game Match Officials Limited (PGMOL).


For engagers in both the public and private sector dealing with the new off-payroll working rules (IR35) introduced in April 2021, the George Mantides case is one to watch. It provides a clear reminder that employment status cases depend on the specific facts and tribunals need to make sure they have the facts clear.

Where an engager is completing a status determination, they must make sure they have understood the contractual terms, whether written or implied. This may require speaking to those who work alongside the contractor in order to demonstrate reasonable care in making their assessment, whether that’s using HMRC’s CEST tool or some other method.  

In 2019 the George Mantides case was decided at the FTT, which ruled one engagement was inside, and one was outside IR35, so a partial win for the taxpayer (an NHS consultant).

Both parties appealed, although HMRC, which should be fully aware of the process, appealed late, while the taxpayer managed to appeal on time. Where there is no appeal, then there can be no overturning of the FTT’s ruling that the NHS consultant was outside IR35 at Medway Maritime Hospital (MMH), so his contractor outside IR35 status stands.

The facts

Although the FTT decision had related to two separate hospitals to which the taxpayer provided services, having succeeded in the FTT in relation to one hospital, the appeal to the UT was by the taxpayer only and related only to the supply of services by a director of the taxpayer as a locum urologist to Royal Berkshire Hospital (RBH). In relation to RBH, the FTT had concluded that the hypothetical contract between the hospital and the urologist, would on balance, have been one of employment.

The UT has now held it was not open to the FTT on the evidence which had been presented to infer two particular terms into the hypothetical contract under the IR35 rules.

The UT noted that it should not interfere with the FTT's findings of fact, unless there was no evidence to support those findings, or they were made on a view of the evidence that could not reasonably be entertained.

Grounds 1 and 2

Applying this principle, the UT held that the conclusions reached by the FTT as to the notice period being at least one week’s notice on either side and the requirement for the RBH to use reasonable endeavours to provide 10 half-day sessions in each week, resulting in between 30 and 40 hours work per week to the urologist, were not supported by the evidence which had been presented to it.

Both factual conclusions were relevant to the FTT's decision that IR35 would treat the hypothetical contract between the urologist and RBH as one of employment. As a result, the taxpayer has established that the FTT had made an error of law.

Ground 3

The taxpayer also asserted that, as a result of these errors, the conclusion reached by the FTT that the notional contract would have been one of employment was itself also an error of law. However, despite succeeding on the two building blocks needed as the foundation for that argument, a decision on that key point has been deferred.

PGMOL case

At the hearing on 15 July 2021, the UT was made aware that an appeal against its decision in HMRC v Professional Game Match Officials Limited [2020] UKUT 147 (TCC) (PGMOL) was due to be heard by the Court of Appeal in the week commencing 19 July 2021. Both parties accepted that the decision of the Court of Appeal would have a significant bearing on their submissions on Ground 3 in the event that they allowed the appeal on Ground 1 or Ground 2. As stated above, it allowed both.

In particular, it had been held in PGMOL that to establish a mutuality of obligation (one of the critical tests for notional employment contract status under IR35) there needed to be an obligation on the employer to provide work (or at least a retainer or some form of consideration in the absence of work). HMRC disputes that test on appeal and points out that at the very least it is to be expected that the Court of Appeal will provide guidance on the application of the mutuality of obligation (MOO) test in this context.

Once this Court of Appeal judgement in PGMOL is known, the UT will conclude its analysis of the taxpayer’s appeal, unless of course an appeal to the Supreme Court in PGMOL ensues.

Meanwhile the taxpayer has made good progress in his aim to overturn HMRC’s assessment as to the tax status of his three months’ work for RBH in summer 2013.

MOO issues

Reflecting on the differences in the FTT decision as to his work for Royal Berkshire Hospital and the other hospital, Medway Maritime Hospital, the taxpayer has now removed two out of three differences. One difference remains however, at Medway Maritime Hospital the taxpayer had the right to send a substitute. Due to the lack of documentary evidence as to any contract with Royal Berkshire Hospital, no such ability existed. This demonstrates why further guidance from the Court of Appeal on the mutuality of obligation test will be critical to the outcome of the UT appeal.

Whilst HMRC has improved CEST and issued more detailed guidance on completion, it continues to maintain its longstanding simplistic view that the MOO test just means a contractor gets paid for doing some work.

What next?

If both PGMOL and Mantides’ clarify the current law on MOO, we should see a change in HMRC’s position and therefore to the HMRC CEST. Anything less will put engagers and contractors in an untenable position.

Replies (1)

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By Justin Bryant
25th Aug 2021 09:48

This is yet another case that shows FTT judges in a bad light. Interestingly the same FTT judge had the heavy responsibility of analysing/interpreting the £1.6bn (tax at stake) Ingenious contracts as a composite transaction, arguably unconvincingly.

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