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In Northern Lights Solutions Limited v HMRC [2020] TC7594, the First Tier Tribunal (FTT) held that IR35 applied to a project manager’s Personal Service Company. He was subject to overarching controls consistent with being a highly skilled employee.

Robert Lee worked as a project manager for the Nationwide Building Society through his Personal Service Company (PSC) Northern Lights Solutions Limited (NLS).

The FTT found that the contract was one of employment and dismissed the appeal.

Whilst the FTT disagreed with HMRC’s view that only a contract between the parties is required to satisfy the mutuality of obligation test, they also commented that the threshold for the test is very low. The judge said that the furlough periods did not affect the test as the contracts continued despite the obligation to work and the obligation to pay being suspended for a fixed period.

Links to our subscriber guides

Employment status & detailed checklist
The employment status of an individual worker depends on whether the individual is engaged by the engager under a 'contract of service', or a 'contract for services'. 

IR35: off-payroll working
The IR35 tax rules apply when a worker supplies his personal services through an intermediary trading vehicle such as a company or partnership to an end client.

Mutuality Of Obligation
Mutuality of obligation has two components; an engager is obliged to offer work to the worker while a worker is obliged to do the work offered.

Personal Service Company (PSC) tax
HM Revenue & Customs (HMRC) define a service company as a company that generates the majority of its income from supplying services rather than goods to clients

External link

Northern Lights Solutions Limited v HMRC [2020] TC7594