George Mantides Limited v The Commissioners for HMRC

Under the IR35 intermediaries legislation, employment status must be determined from the terms of the hypothetical contract and all the surrounding circumstances. Mutuality of obligation and control are necessary, but not necessarily sufficient, conditions for employment. A wage-work bargain may satisfy mutuality even where the engager has no obligation to provide future work. The absence of such an obligation, and a right to terminate without notice, may nevertheless be relevant factors at the third stage. They are not automatically decisive, particularly in a short temporary engagement. The tribunal must make a qualitative assessment and must not treat another engagement as a benchmark.

George Mantides Limited, the personal services company of a urologist, appealed against the First-tier Tribunal’s decision on the application of the IR35 legislation to services supplied to Royal Berkshire Hospital and Medway Maritime Hospital. The FTT treated the hypothetical Royal Berkshire contract as one of employment, but its findings included an erroneous one-week notice term and an obligation on the hospital to use reasonable endeavours to provide work. The Upper Tribunal had already established those errors of law and deferred the resulting issue. The question was whether the errors required the decision to be set aside and remade, and whether the hypothetical contract was one of employment.

The appeal was allowed to the extent that the FTT’s decision concerning the Royal Berkshire Hospital payments was set aside and remade. The Upper Tribunal nevertheless reached the same substantive conclusion and dismissed the appellant’s appeals against HMRC’s income tax determination and national insurance decision.

1. Applicable approach. Mutuality of obligation and control are necessary, but not necessarily sufficient, conditions at the first two stages of the Ready Mixed Concrete v Minister of Pensions and National Insurance test. At the third stage the tribunal must consider all contractual terms and surrounding circumstances.
2. The right to terminate without notice is irrelevant to mutuality at the first stage, but may be relevant at the third stage as one factor among many. Here it pointed against employment, but was weak given the short, temporary engagement. The absence of any obligation on RBH to provide work did not negate mutuality at the first stage. It reduced the extent of the mutual obligations, but was not a particularly strong pointer towards self-employment.
3. The status of the Royal Berkshire hypothetical contract had to be determined by its own terms and circumstances. The Medway contract could not be used as a decisive comparator or gold standard.
4. Personal service, a sufficient framework of control and a wage-work bargain pointed towards employment. Other factors were weak, neutral or pointed away from employment. Standing back, the balance showed that the Royal Berkshire hypothetical contract was a contract of employment. The errors were material because they might have made a difference, so the decision was set aside and remade.

• Upper Tribunal (Tax and Chancery Chamber): The FTT’s decision released on 13 June 2019 treated the hypothetical Royal Berkshire Hospital contract as employment and the Medway Maritime Hospital contract as self-employment. The Upper Tribunal previously found errors of law in the Royal Berkshire findings. In this decision it set that part of the FTT decision aside, remade it, and dismissed the appellant’s appeals against HMRC.