Primary Path wins IR35 appeal

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First Tier Tribunal judge Edward Sadler disagreed with HMRC’s assessment of an IT contractor’s employment status and upheld his appeal in the Primary Path v HMRC case (TC 01306) last month. John Stokdyk reports.

The appeal involved Philip Winfield, the sole shareholder and director of Primary Path, who worked on two database interface projects for GlaxoSmithKlein under contracts arranged by two separate agencies. The two assignments were carried under series of sequential contracts during 2001-03.

HMRC decided that despite his contractual arrangements with intermediary agencies, Whinfield was caught by the IR35 regime. The tax department informed him in October 2007 that £25,000 was due in income tax and National Insurance Contributions because he was effectively in an employee relationship with GSK.

Both the taxpayer and HMRC cited some of the defining cases on employment status and IR35 - including Dragonfly Consultancy, Usetech Ltd and Express Echo Publications - but at the heart of the tribunal decision were the criteria laid down by Judge McKenna in the 1968 Ready Mixed Concrete case:

  • The existence of a “master-servant” relationship and its more politically correct variant “mutuality of obligation”
  • The degree of direct, personal control exercised
  • Other conditions that might indicate a contract of service.

As is customary in these cases, the tribunal judge considered the contacts signed by Primary Path, the agencies and GSK as well as the practices and conditions surrounding the work to create a hypothetical contract that would have defined the nature of the engagement.

The full article covers what the tribunal decided on these key points.

STOP PRESS: Accountax also reports that the recent Supreme Court judgment in Autoclenz Ltd v Belcher and Others (UKSC 41) may shift the balance in some employment status cases. A group of self-employed car valets who worked for Autoclenz argued that clauses in their contracts did not reflect their actual working arrangements and that they were obliged to provide the services personally in spite of contractual substitation and mutuality clauses. The Supreme Court agreed, establishing a precedent that the conduct of the contractual parties could trump the written terms. “This is the most significant employment status judgment since Express and Echo Publications and… Ready Mixed Concrete. It is not an overstatement to say that the foundations of employment status have been rocked to their very core,” Accountax commented. These cases will be covered in a series of autumn update seminars the firm is running. More coverage of this case follows shortly.

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About John Stokdyk

John Stokdyk, AccountingWEB head of insight

AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.


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05th Aug 2011 11:38

IR35 - Flatlined?

Yeah, OK, HMRC, you can stop now. I think you've broken the ribs now you've overdone the CPR. It's just as well the patient's dead, I suppose.

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to Asma
05th Aug 2011 12:00

Not quite so sure...

You posted your comment before I added the "Stop Press" about the Autoclenz decision. I haven't had time to read the decision yet, but wonder if it will work in HMRC's favour in some IR35 cases. My source for this, Matt Boddington, is out of the office today - are there any employment status experts out there who are ahead of me on this and can help?

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05th Aug 2011 12:38 expert as I can be


In answer to your call for assistance I will chip in this much.  Firstly I advise SMEs on HR issues so the question of employees cf using contractors is one that often crops up in my work.  I have also read the Supreme Court judgement [and indeed the judgements at previous stages of this case] as I feel I gain more from working through the logic and salient points of the actual text [perhaps I should get out more :)].

I do not think that Autoclenz would alter Primary Path.  I say that because in Autoclenz the facts of the situation [especially the evidence of the Autoclenz site manager] showed that the practice was completely different to the written contract.  Conversely it appears [based solely on the precis given in the article above] that the evidence of actual practice in Primary Path all supported the contractual agreement for the provision of services [as opposed to "..of service"].

I suppose in lay terms [that's me] I would say that peppering a text with references to an individual being "self-employed" will not now hide an actual practice of treating them as an employee.

However, it should also be remembered that lawyers remind us that each case turns on its own facts for a good reason.  The Supreme court was rejecting an appeal.  It made it clear that the ET had made findings of fact "These are findings of fact which Autoclenz cannot sensibly challenge in this Court. In short, they are findings which were open to the ET" and that "...the ET was entitled to hold that the documents did not reflect the true agreement between the parties and that, on the basis of the ET's findings, four essential contractual terms were agreed.." [both from the judgement which can be read here ]

Hope this helps


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By aburt01
08th Aug 2011 13:22

My reading of recent cases...

When I read certain cases they seem bizarre.  How could they have thought that, I ponder.

Sometimes you might say "workers were treated like dirt" and I might agree with you.

Consider our local hairdresser... the proposition goes something like this:- Paperwork states "self-employed" hairdresser will hire the chair, the equipment, and pays for the water they use plus all other materials.  They can turn-up when they feel like it and leave when they wish.  No pension provision, no national min. wage, it's up to the worker to arrange their own compliance.  If you take a contract for service/position like that then fair enough, perhaps you wanted the flexibility.

Let's say, it often appears the reality is somewhat different.  Well, someone has to be there when the boss, sorry, owner of premises, is on holiday, right?!  And who does the boss/owner call when running late, to kindly open-up at 9am?

All cases should stand own their own merits - I read Autoclenz’s argument last week and it seems the judges felt it clearly collapsed on it's own merit without any help from anyone. 


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08th Aug 2011 14:51


The two cases seem very clear. Contractual and actual have to go hand in hand and where an unscrupulous employer tries it on they will get caught.

Sometimes however the boot is on the other foot where the self-employed try to get employees rights at the expense of the employer.

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08th Aug 2011 18:32

The real problem with IR35...

HMRC and its predecessor organisation, the Inland Revenue (and no they are not the same) have suffered more at the hands of IR35 than anyone else.

The original premise of IR35 was that the 'deemed employer' (if that term can meaningfully be used) would be responsible for the determination of whether IR35 was applicable or not and the deduction of the necessary taxes when it was. If the determination was wrong, then the 'deemed employer' would be the one in the firing line.

However, the major consultancy organisations recognised from day one that this would be a contentious nightmare and pushed the liability back to the party least able to be able to pay / afford the bill if it came knocking.

This crippled legislation, was a political stitch-up, serving the interests of no-one. The only reason that it has survived this long was that repealing the legislation without an effective replacement was considered unacceptable.

The only organisations that seem to be 'winning' in the IR35 battle appears to be the companies selling tax investigation insurance.

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10th Aug 2011 18:00

Self-employment and employment

Isn't it about time that there was a legal definition of employment and self-employment, both for tax and employment law purposes? 

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to thomas34
11th Aug 2011 12:15

Not so elementary?

Dear Sherlock

The Autoclenz case was an example of an attempt to use a document to legally define a situation, as self employment, which was held to not reflect the real facts of the arrangements.  As soon as any other definition were to be written, actually probably before the metaphorical ink was dry, some of the finest legal brains would be trying to find ways to show that the definition didn't apply.  In some instances their efforts would relate to genuine situations where it did not apply.  Others would be like the Autoclenz case, an attempt to say one thing and do another.

Whilst one common definition across all legislation might be helpful IMHO it would be fanciful to believe that that would end all controversy or tribunal/court cases on the matter.



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