In George Mantides Ltd v HMRC [2019] TC07202 the FTT reviewed the services of a hospital locum for the purposes IR35 and decided on a different outcome for each of two hospital contracts.
- Mr Mantides is a urologist and in 2013 was supplying locum services to Royal Berkshire Hospital (‘RBH’) and Medway Maritime Hospital (‘MMH’) via his personal service company.
- His work consisted of conducting outpatient clinics, procedures and minor operations. At RBH he also undertook a small amount of on-call duty
- HMRC determined that the Employment intermediaries legislation, 'IR35' applied. It issued PAYE and class 1 National Insurance contributions (NIC) assessments under PAYE Regulation 80 and section 8 of the Social Security Contribution (Transfer of Functions etc) Act 1999.
Under the term of IR35 it is necessary to consider the terms of a hypothetical contract between the worker and the end client: i.e. if Mr Mantides had been directly engaged by each hospital would he be employed or self employed?
The FTT considered the facts of the case and formed a hypothetical contract with the following provisions:
|
Hypothetical contract provision |
RBH |
MMH |
|
Term |
Fixed |
Fixed |
|
Termination |
At least one week's notice on either side |
One day’s notice on each side |
|
Personal services |
Yes |
Yes |
|
Substitution |
No: no right to provide another person |
Yes: after consultation with the hospital |
|
Notification of duties |
By weekly rota |
By weekly rota |
|
Working hours |
10 x half day sessions per week |
10 x half day sessions per week |
|
Mutuality of obligation |
RBH would agree to use reasonable endeavours to provide 10 half hour sessions. With consent of RBH he could take holidays and miss occasional sessions. |
No obligation by MMH to provide, or try to provide, any sessions in a week |
|
Pay |
Agreed rates per hour worked |
Agreed rates per hour worked |
|
Integration |
Required to attend morbidity and mortality meetings |
Required to attend morbidity and mortality meetings |
|
Holiday pay, sickness and benefits |
No entitlement |
No entitlement |
|
Travel |
Reimbursed for travel around sites |
Deciders for IR35
After reviewing the facts of each hypothetical engagement the FTT concluded that if Mr Mandes had worked directly for RBH he would have been an employee however he would have been self employed in working for MMH.
|
Indicator |
RBH |
MMH |
|
Personal service/substitution |
Employment |
Self employment |
|
Control |
Not enough to provide a strong indication of employment |
|
|
Mutuality |
Employment |
Self employment |
|
Substitution |
Employment |
Self employment |
Comment
The combination of a lack of notice period, the right of substitution and the lack of Mutuality of Obligation confirm self employment. HMRC have still scope to appeal the decision, if they disagree. Given the cost of doing that it would be bad value for the taxpayer and as this is a FTT decision, no legal precidents were created.
A read over the full decision shows (if any evidence was needed) how difficult it can be to self-assess IR35.
The Off-payroll working rules now trump IR35 and apply to:
- Public sector engagements from 6 April 2019
- Private sector engagements from 6 April 2020
Public sector employers such as RBH and MMH are now steered by HMRC to use its CEST 'Check Employment Status for Tax' this has received criticism for not considering mutuality.
It is would be interesting to know how Mr Mandes has been assessed if the CEST was applied to this case. Do let us know its results if you decide to work through it!
Our practical tax guides on this topic
Employment intermediaries legislation, 'IR35'
Personal service companies & tax
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