HMRC win another IR35 case

This case was originally heard by the First Tier Tribunal (FTT) in May 2019, Mr Mantides was a doctor specialising in urology working through his personal service company George Mantides Ltd (GML). The company had appealed tax determinations and National Insurance decisions issued by HMRC relating to 2013-14 tax year.

HMRC held the view that the IR35 legislation applied to the locum services provided by Mr Mantides to the Royal Berkshire Hospital (RBH) and Medway Maritime Hospital (MMH). The periods under review were March 2013 to August 2013 regarding RBH and 16 September 2013 to 21 October 2013 in respect of MMH. 

The FTT found that the contract with MMH was outside of IR35, whilst the contract with RBH was considered to be within the IR35 legislation. Both Mr Mantides and HMRC appealed the respective decision they had lost although HMRC were late in submitting their appeal to the Upper Tier Tribunal (UTT) and found to be out of time, meaning the MMH decision remained in place.

The UTT case was first heard in July 2021 and GML appealed on three grounds:

• Ground 1 – The FTT made an error of law in that it found that the hypothetical contract between RBH and Mr Mantides would have contained a provision that RBH would have to give at least a week’s notice to terminate early. That was an error of law because it was not a conclusion available to the tribunal on the evidence before it;
  
  
• Ground 2: The FTT found that in the hypothetical contract RBH would have been under an obligation to use reasonable endeavours to provide 10 half day sessions in a week. That was a conclusion which was not available to the tribunal on the evidence;
  
  
• Ground 3: As a result of these errors the FTT erroneously concluded that the notional contract would be one of employment. That was an error of law.

The UTT found that errors in law in the first two grounds of appeal were made, however the third ground of appeal was deferred awaiting the outcome of HMRC v Professional Game Match Officials Limited (PGMOL), with the judgement issued by the Supreme Court on 16 September 2024.

This case was finally heard at the UTT on 10 February 2025. The UTT were satisfied that there were errors in law regarding Grounds 1 and 2 that were material and that the decision of the FTT had to be set aside and the decision re-made.

Whilst the UTT found that the FTT failed to take into account the true extent of mutuality of obligation under the RBH hypothetical contract in that there was mutuality of obligation in the sense of wage-work bargain however it considered there was no obligation on RBH to provide work, or to use reasonable endeavour to provide work. This being reflected in the fact that the contract was terminable without notice nevertheless the UTT considered that neither were particularly strong self-employment pointers, in the context of the short temporary engagement.

The UTT looked at a number of recent authoritative decisions and, in addition, also looked at the terms of the hypothetical contract with RBH and found there was a sufficient framework of control and mutuality of obligation in the sense of the wage-work bargain and that the RBH hypothetical contract was one of employment.

This was supported by the facts that the contract was for the personal services of Mr Mantides with no right to provide a substitute, it would require him to provide the services notified to him by the weekly rota provided by RBH and he was required to be available for 10 half day sessions in each week,

The UTT were satisfied that the FTT had ultimately reached the right conclusion that IR35 did apply and GML’s appeal was dismissed.

So, here we are 12 years down the line from when the original services were provided before the latest decision was made.  It is not known at this stage whether a further appeal will be made by GML.

This case only relates to a six-month period of the 2013-14 tax year, and it is not known what amount of the initial assessments which totalled £29,600 relates to the RBH contract.

It is clear from this case that HMRC remain focused on the matters of principle, especially in relation to the IR35 legislation rather the liability at stake. Undoubtedly it would have cost the UK taxpayers in general, more to defend this principle than the amount due to be recovered.