A recent article written by Qdos Contractor has examined the findings of an IR35 determination case heard by the Tribunal.

The appellate case originally went before the Tribunal in November 2016, but because the court only gave a verbal decision and no request was made for a written statement, the results have only become known recently.

The Tribunal case concerned Armitage Technical Design Services Ltd (ATDSL), a company that offered specialist services to the nuclear industry.

HMRC had decided that the services that ATDSL provided to Diamond Light Source Ltd (DLS) for the years 2009-10 and 2013-14 were within IR35. In addition, HMRC had issued penalties on the grounds that company owner Mr Armitage had not undertaken the proper considerations in deciding whether ATDSL’s contracts were subject to IR35. The company appealed HMRC’s decision as well as the penalties.

In making its decision, the Tribunal considered the important tests for determining employment status, including control, mutuality of obligation and right of substitution/personal service. Mutuality of obligation is a test ignored by HMRC’s CEST tool.

The Tribunal found that the right of substitution did exist, although it noted that given the specialist nature of ATDSL’s services, such a right was more theoretical than practical. On the matter of control, the Tribunal concluded that there was little oversight on how ATDSL performed its services, so although DLS had some control, it was not enough to make DSL the “master.” On mutuality of obligation, the Tribunal ruled that simply having an agreement to work for payment was not sufficient, as this would apply to all contracts. The Tribunal therefore ruled in ATDSL’s favour.

Qdos Contractor believes that this case again shows how HMRC has failed to offer guidance on how to determine employment status and has also not given accurate assessments in many cases.