ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Back to the Drawing Board?

HMRC
  • LinkedIn (opens new window)
  • Twitter (opens new window)
Justine Ricommini By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)

12 April 2018

Main Points

  • The First-Tier Tribunal has ruled against HMRC in its latest IR35 case.

  • Despite several pointers towards ‘employment’ within the contract, the Judge ruled IR35 did not apply.

  • This case complicates the employment status regime even further for employers and advisers.

Justine Riccomini examines HMRC's recent IR35 loss.

Much has been made of the recent HMRC victory in February 2018 over former Look North TV presenter Christa Ackroyd who was presented with a tax bill of around £420,000 covering the years 2006/7 to 2012/13. Heralded by everyone except HMRC as the first victory for nine years, less than a month later, HMRC received the news in mid-March 2018 that it had lost its case against Mark Daniels at the First-Tier Tribunal (who worked through a personal service company MDCM Ltd), this time over a contract of two tax years’ duration (2012-13 to 2013-14).

Background

MDCM Ltd was engaged under a contract to provide services to Structure Tone Limited via an agency, Solutions Recruitment Limited. When HMRC reviewed the arrangements, it concluded that but for the existence of the intermediary company MDCM Ltd, Mr Daniels would have been an employee of Structure Tone. HMRC also emphasised high levels of supervision, direction and control as well as the lack of financial risk when making its case.

A strong enough counter-argument?

MDCM Ltd argued that not only was there no control, but the lack of severance pay, notice period, holiday pay or travel and subsistence in the carrying out of the work was indicative that a contract of employment was not in place.

However, the case found that Mr Daniels was deemed to represent Structure Tone to outside contractors, was working under the title of Night Shift Manager, completed a time sheet, wore Structure Tone branded protective workwear and took instructions as to what work was required from the site manager.

The Rationale

The Judge commented, despite ruling in favour of MDCM, that even though the terms of business included a substitution clause, substitution could not have happened in reality. Thus, substitution was not in point, which of course means Mr Daniels could only have been providing a personal service with mutuality of obligation.

Having taken each of the factors to determine employment status (such as lack of financial risk, provision of equipment, personal service, employment rights, substitution etc) into account and placing them into a “hypothetical” contract, the Judge considered that the criteria pointing to employment were outweighed by the criteria pointing towards self-employment.

In summing up, the Tribunal did not accept HMRC’s arguments about control but did agree that the requirement for personal services and lack of financial risk pointed to an employment relationship. However, it found that the nature of the payment arrangements, a flat rate per day with no notice period and no entitlement to any employee benefits were inconsistent with employment.  Further, Mr Daniels was not treated as an employee.

More holes than Emmenthal?

The weighting of substitution as set out in the main case upon which HMRC relies came to the fore again recently after being given something of a back seat in the last decade.

Does this mean back to the drawing board in terms of trying to determine how IR35 should work? With such disparity of treatment between IR35 and employment status cases generally, the question of employment status is highly unpredictable.

Consultation

HMRC is currently consulting on how the whole approach to employment status should be resolved.  

ICAS will be responding to this consultation – if you have any comments or feedback you wish to have included, please send them to tax@icas.com.

Conclusion

The whole area of employment status is complicated - and made more so when the tribunals come to conclusions which vary so widely. Confusion reigns and employers are left at a loss as to what the right path is.  Arguably, the case for the introduction of legislative definitions of employed, worker and self-employed categories has never been stronger.

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: