In George Mantides v HMRC [2025] UKUT00124, the Upper Tribunal (UT) found that a hospital locum who operated through a Personal Service Company was subject to the IR35 rules. The hypothetical contract was one of employment.
Mr Mantides had two separate hospital contracts that were challenged by HMRC, who believed both contracts fell within the Off-Payroll IR35 rules.
Mr Mantides Appealed to the First Tier Tribunal (FTT), which ruled that one contract fell within IR35 and the other did not.
Mr Mantides appealed against the FTT decision on three grounds:
- The FTT made an error of law in that it found that the hypothetical contract between Royal Berkshire Hospital (RBH) and Mr Mantides would have contained a provision that RBH would have to give at least a week’s notice to terminate it early. That was an error of law because it was not a conclusion available to the tribunal on the evidence before it.
- The FTT found that in the hypothetical contract, RBH would have been under an obligation to use reasonable endeavours to provide 10 half-day sessions in a week. That was a conclusion not available to the tribunal on the evidence.
- As a result of these errors, the FTT erroneously concluded that the notional contract would be one of employment. That was an error of law.
Grounds 1 and 2 were upheld. The Upper Tribunal (UT) accepted that Mr Mantides had established that errors of law had been made. A fourth ground was dismissed by the UT.
It was agreed that Ground 3 would be heard once the outcome of HMRC v Professional Game Match Officials Limited (PGMOL) was known. This was subsequently published in October 2024, allowing the UT to consider Ground 3.
The UT looked at the construction of the hypothetical contract between Mr Mantides and the RBH. The following points were considered:
- The contract was for a fixed term and terminable by either party.
- The contract was for Mr Mantides' personal services and there was no right to provide a substitute.
- Mr Mantides would provide services requested by the weekly rota drawn up by the hospital.
- Holidays had to be agreed to by the hospital.
- There was no obligation for the hospital to provide work.
- Salary was paid on an hourly rate with no entitlement to holiday pay, sickness or pension benefits.
- Mr Mantides had to attend morbidity and mortality meetings.
The outcome of the PGMOL case confirmed that under the test established in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] (RMC), Mutuality of obligation and control are necessary, but not necessarily sufficient conditions for a contract of employment.
Furthermore, stage three of the RMC test ensures all the relevant factors are to be considered when determining whether a contract is one of employment or not.
In PGMOL, the Supreme Court:
- Rejected, a submission made by PGMOL that suggested that mutuality of obligation involves more than just payment in return for services but requires an obligation to provide work in return for payment of services.
- Rejected an argument that the right to terminate an agreement with no penalty nullified the existence of mutuality of obligation.
- Agreed that the right to terminate was a factor that should be considered when reviewing stage three of the RMC test.
The UT found:
- It was incorrect to compare the RBH hypothetical contract with the contract that the FTT had previously found not to be an employment contract.
- Whilst it was similar, the UT was solely concerned with the RBH contract, emphasising that judgements had moved on since the earlier FTT decision was made.
- It was clear from the outcome of PGMOL that the right to terminate a contract is irrelevant when considering the first stage of the RMC test but may be considered a factor when reviewing the third stage.
- The FTT had erred in law by failing to take account of the full extent of mutuality of obligation.
- The hypothetical contract had sufficient framework of control and that indicated an employment contract.
- After all points were considered, ultimately, the FTT made the right decision, and the hypothetical contract was one of employment.
The appeal was dismissed.
Useful guides on this topic
IR35 and hospital locum: different result for different contracts
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.
Locum IR35 appeal clears first hurdle
In George Mantides v HMRC [2021] UKUT 205, a hospital locum successfully challenged part of the First Tier Tribunal’s (FTT) reasoning in his ongoing IR35 appeal as to the terms of the hypothetical contract. The Upper Tribunal (UT) found that the FTT was not entitled, on the evidence, to make certain findings as to the notice periods and working hours.
Employment intermediaries legislation, 'IR35'
What is IR35? How does it work? How is the deemed payment calculated? What expenses are deductible?
Off-Payroll Working
The 'Off-Payroll Working' rules move IR35: the responsibility to assess a worker's employment status and to deduct Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs) from a worker's fees, away from the worker's company to the End-Client in the labour supply chain.
Personal Service Companies & tax
What is a PSC? What are the tax implications for a PSC?
Employment status
You may think that you have 'an IR35 proof contract' but if the parties act differently their actions will override written provisions. Any changes agreed by the behaviour of the parties may be enough to vary terms.
Mutuality of Obligation
What is mutuality of obligation? Why is mutuality of obligation not considered by HMRC's Check Employment Status for Tax tool?
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