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.
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.