HMRC have again failed to convince the Tribunal that their pursuit of an alleged breach of IR35 regulations was justified.

The case revolved around the provision of engineering services by the company Marlen Ltd and freelance contractor Mr Hughes to two JCB divisions via a number of contracts.  Marlen Ltd.’s accountancy service, Accountax, argued vigorously that IR35 legislation did not apply in this case – and the Tribunal found resoundingly in their favour, against HMRC.

Presiding Judge Lady Mitting indicated that two factors were taken into consideration, mutual obligation, and control, as these were perceived to be the absolute minimum for a workable employment contract.  She said, “Whilst we found some evidence of control, that which does exist falls short of that which is required in the terms of the test propounded by MacKenna J.  The picture in relation to mutuality is even clearer.  It is our conclusion that there is no mutuality of obligation and the degree of control which would have been needed to establish a contract of employment just did not exist.”

Mr Hughes’ flexibility to determine holiday, absences, and hours worked was regarded by the Tribunal as key evidence that he could not be considered an employee.  The Tribunal dismissed HMRC’s contention that mutuality of obligations existed in the contracts.  A critical point was that Mr Hughes was sent home without pay when computer services crashed – a key indicator that mutuality of obligation did not exist.

According to the PCG, the case is one of a string of defeats for HMRC, and suggests, “the cases they are choosing to pursue are clearly not within the gambit of IR35.”

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