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HMRC’s Missed IR35 Appeal Deadline: How it Affects Contractors

IR35

Following the news that HMRC have failed to appeal a First Tier Tribunal (FTT) IR35 decision because they missed the deadline for submission, in this article we’re looking at this case and another that affects it, to examine how this situation may affect contractors as it unfolds.

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Dr. George Mantides vs HMRC

In the initial appeal to the FTT, George Mantides represented himself and achieved a partial victory. The FTT Judge found that IR35 did not apply to his 5-week contract with Medway Maritime Hospital, but that it did apply to his work at the Royal Berkshire Hospital.

Both Dr. Mantides and HMRC attempted to appeal this decision. HMRC’s appeal was denied because they missed the deadline, and Dr. Mantides’ appeal is awaiting a judgement by the Court of Appeal in another case, although the Upper Tier Tribunal (UTT) has already found that the FTT made errors of law.

Professional Game Match Officials Ltd (PGMOL) vs HMRC

This case concerns whether part-time football referees were employed or self-employed when they were engaged by PGMOL to officiate 5 football matches.

The FTT found that they were self-employed because:

  • There was no mutuality of obligation (MOO) outside individual engagements and on that basis the overarching contract was not a contract of employment
  • There was insufficient MOO and insufficient control in the individual contracts, so they were also not contracts of employment

The UTT upheld this decision and found there had been no error of law. HMRC were granted leave to appeal, and at the time of writing, the Court of Appeal are considering their judgement.

This is not an IR35 case because the referees were self-employed and not trading through PSCs, but the UTT is waiting for the Court of Appeal’s judgement before deciding the George Mantides case.

How does all this affect contractors?

There are two main issues in these two connected cases that contractors should be aware of, and the contracting industry is watching with interest as the situation unfolds.

HMRC keep “getting it wrong”

The spectacle of HMRC missing a deadline, and the irony of the tax man being penalised for late submission, have definitely attracted attention and it won’t do anything to improve their reputation. This event sits in a landscape of systemic error, where HMRC loses the majority of IR35 cases and where they apparently struggle to understand the case law surrounding legislation they are tasked to enforce.

This is a cause for concern, as it means that compliance with the law is no protection against HMRC investigation and contractors who are clearly outside the scope of IR35 could find themselves defending their position in court.

Even though the IR35 status of most contracts is now decided by the end client, it’s still important that contractors understand their status and habitually gather evidence in support of it. Contractors, end clients and recruiters must have easy access to expert advice, so they can face any challenge to IR35 status decisions from a position of strength.

HMRC’s interpretation of MOO

One reason the contracting industry is watching these two cases so closely, is the hope that the Court of Appeal will clarify the issue of Mutuality of Obligation (MOO) in their judgement of the PGMOL case. This judgement will inform the UTT’s decision in the George Mantides case, creating an even stronger precedent.

HMRC has long held the belief that MOO exists wherever a worker agrees to complete work in return for pay. For this reason, they believe that MOO exists in every contract, and their online status tool, Check Employment Status for Tax (CEST) does not consider whether MOO exists, because they believe it always does.

This interpretation has repeatedly been found to be incorrect by the courts, and has been criticised by employment law specialists with increasing frustration and ever stronger language.

Should it be found that MOO does not exist in either of these cases, this will prove that HMRC’s interpretation is wrong, which will further demonstrate CEST to be unfit for purpose, and call into question hundreds of thousands of IR35 status determinations.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.

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