In 2011 Mr Philip Winfield, an IT database consultant providing services to GSK via his LTD Company, took the brave step of appealing to the tax tribunals following an initial ruling from HMRC that he was caught by IR35. The tribunal found unequivocally that Mr Winfield was not in an employment relationship with GSK and was in fact, outside of IR35.
The judgement, which can be found in full here, will provide confidence to many of the current suppliers of GSK that their contractors are likely to be outside of IR35. It demonstrates that HMRC faces an uphill struggle to prove an employment relationship would be in place if the contract was directly between the contractor and GSK.
Contractors affected by HMRCs recent activity should seek the advice of their accountants or IR35 advisors in responding to HMRC and should reference Primary Path v HMRC 2011 as part of their defence. The contract between the contractors Limited Company and the agency will be the primary point of IR35 reference. It is also likely that GSK’s legal teams will want to support the contractors as not being in an employment relationship to stave off any potential employment status claims if they were to argue the opposite.
In Primary Path’s case, the judges looked at the three significant indicators of employment status and concluded that there was:
Lack of employment Mutuality of Obligation (MOO)
Lack of personal service
Lack of right of control on how works are performed
The judge also identified the business risks of being self-employed as being present in the relationship, as well as the requirement to hold business insurance.
Further supporting the outside IR35 position was that the actual working HR practices showed that they were not entitled to career progression, appraisals, GSK paid training or access to employee only benefits.
A key benefit of this case is that it will give GSK, and other end clients in the private sector, the confidence that from April 2020 when IR35 reform is introduced, that they can operate their contractors outside of IR35 where:
The client has the right self-employed style contracts in place, and
Their contractors do not receive employee benefits or access to HR processes
NASA provides an IR35 appraisal to all our Limited Company clients. This provides a robust and documented audit trail demonstrating that a contractor has considered their IR35 status fully and can support any end client process in determining IR35 status. If you would like to talk to NASA about how we can support you and your client with IR35 reform into the private sector, please contact email@example.com