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  • Writer's pictureNasa Umbrella

Contractor has lucky IR35 win, but there could be a sting in the tail

A contractor has won an IR35 appeal against HMRC, but having handled the case himself is probably fortunate with the outcome. The tribunal judge appeared to have limited knowledge on IR35 and employment status, giving contradictory reasons in the judgement as well as misunderstanding the law.

The judge has allowed the appeal to this specific contract of Mr Daniels’, and stated it does not apply to other contracts of his. This means HMRC could apply IR35 to his other assignments and the appeal would not stand against those.

The tribunal considered evidence and statements from the contractor, the finance director of the end client and HMRC submissions in coming to its conclusion. The full judgements can be found at for those who enjoy the finer details.

The main points that went against the contractor:

  • He stated that although he had a full right to arrange a substitute in the contract terms, he was not able to do this in practice.

  • There was, according to the judge, Mutuality of Obligation in place although he completely undermined that in summing up when he said there was no requirement for notice period and pay. As a note on law, all contracts have mutual obligations, however for IR35 to apply they need to be mutual obligations consistent with an employment. Eg providing pay if there is no work.

  • The worker was not able to profit in the contract, although they did not look at his ability to profit over the year or full accounting periods of the company. They did not look through the reasons why there are insurance requirements in place for the contractor.

The main points in the contractor’s favour to keep him outside of IR35:

  • He was in control of how he carried out the project management task during his shifts and that working to company guidelines did not result in employee type controls being present.

  • His daily rate of £310 was inconsistent with employment especially where no notice period was required.

  • Mr Daniels was not entitled to employment benefits as employees of the end client were, and neither was he invited to employee functions.

  • Mr Daniels could refuse to work at other sites for the clients and was not employee style integrated into the end client.

We all hope that HMRC does not apply IR35 to the other contracts of Mr Daniels, although he has done extremely well to win the case himself. A more knowledgeable judge applying some of the control issues discussed in the recent BBC case may have resulted in a different outcome.

At Nasa Group we always provide professional support in IR35 cases to remove any sting in the tail, and we would never advise a contractor to say they could not substitute when the contracts provided every legal right to use a substitute.

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