Contractors News

IT Contractor loses IR35 appeal to HMRC

An IT contractor has lost their Upper-Tier Tribunal to HMRC. In the recent case, contractor Robert Lee, who was contracting for Nationwide Building Society under his…

Andy Vessey by Andy Vessey

An IT contractor has lost their Upper-Tier Tribunal to HMRC. In the recent case, contractor Robert Lee, who was contracting for Nationwide Building Society under his limited company, Northern Light Solutions Limited, had appealed the decision that was reached in the First-Tier Tribunal, where Lee lost the case.

Ultimately, the decision in the recent Upper-Tier Tribunal ended with the same result, with Lee once again losing the tribunal. It has been reported by Contractor UK that Lee owes £70,000 to HMRC. Read on to find out why he lost on both occasions and how his IR35 status was assessed.

Northern Light vs HMRC: what’s the history?

When the First-Tier Tribunal decision was reached in 2019, these were the key facts raised at the time:

– Lee was subject to considerable control by Nationwide, consistent with being a highly skilled employee. Nationwide also had the right to direct where he worked.

– There was Mutuality of Obligation (MOO) within the contract.

– Lee started working for Nationwide in 2007. Other than a few short breaks, he worked continually for Nationwide for many years.

– Lee had responsibility for the allocation of tasks to the project team, a mixture of employees and sub-contractors, and for determining the cost and timescales for delivering the project.

– Lee was integrated into the Nationwide team.

– All his work was subject to the governance standards of the Nationwide Framework. This directed how the project was to be managed, and the weekly reports.

– Lee was required to work 7 ½ hours a day and meet weekly hours targets.

– Each of Lee’s contracts was for a fixed term.

– There was an unexercised right of substitution, but this required Nationwide’s consent. In reality, it was difficult to send a substitute due to the high level of specialist experience required. In any event, Nationwide’s approval would be required before he ever used a substitute.

– Lee took very little financial risk and he had few expenses. His financial exposure was similar to that of a full-time employee on a fixed-term contract.

Mutuality of Obligation underutilised

In both the First-Tier Tribunal in 2019 and the recent Upper-Tier Tribunal, there was a low threshold approach to Mutuality of Obligation (MOO). On the one hand, Robert Lee was Nationwide’s preferred contractor and ‘go to’ man and it is not unreasonable to suppose that over a relationship of 7 years standing, that some expectation of work offer and acceptance may have developed over time, rather in the same manner as the Christa Ackroyd case.

On the other hand, each year Lee had a period of furlough imposed on him for 2 – 3 weeks during mid-December to early January. As such, he received no fee. No such furlough period applied to Nationwide employees. Nevertheless, the First-Tier Tribunal viewed this as a temporary suspension of the work-pay obligation, and it did not affect MOO. This contradicts the 2011 First-Tier Tribunal decision in Marlen Ltd, when in situations when the end client (JCB’s) computers failed, contractors were sent home without pay whereas employees remained in situ.

This was seen to be inconsistent with a relationship in which MOO is present. This disparity shows that the courts are not taking a uniform approach to MOO when this test is key to employment status.

Right to Substitution in Northern Lights case

Whilst Lee had a contractual right of substitution, unfortunately for him, it was highly bound to make this test ineffective. HMRC referred to notes of meetings in October 2014 and 2016, in which Nationwide confirmed that Lee could not send someone else to do the work and that the reality was that substitution was not going to happen. This demonstrates that where there is doubt as to the authenticity of a right of substitution, contractors should confirm the position with the end client and, if necessary, invoke that right even if it’s for a nominal period.

The level of control

Whilst Lee could not be moved from task to task at the whim of Nationwide, both the First-tier Tribunal and the Upper-tier Tribunal concluded that Nationwide had a sufficient framework of control to ensure that it controlled Lee. Lee was expected to adhere to the Nationwide Change Framework (NCF), which was a set of governance standards that applied to all projects directing how the project was to be managed, setting required levels of visibility and accountability.

During the First-Tier Tribunal hearing, there was disagreement as to whether the NCF was specific to Nationwide or was an industry standard for project management in financial services. The judge said that nothing turned on that point, but found that NCF was specific to Nationwide, but that similar project management standards would have applied in other organisations. If industry standards had been in force, then it is concerning that a Tribunal would view these as an instrument of control.

In the 2009 Special Commissioners case involving Sherburn Aero Club, the fact that flying instructors had to observe a syllabus for instruction did not amount to control, as this was decreed by the Civil Aviation Authority, so the club had no power in deciding what lessons should comprise.

How can contractors check IR35 status?

HMRC certainly had the upper hand in this case, as they were able to refer to things that Nationwide representatives had said unhindered, as no witnesses from Nationwide were willing to give evidence, so there could be no cross-examination.

When contractors are checking their IR35 status, they should consider an IR35 tool for a comprehensive view of the strengths and weaknesses of their engagement.

One option they could look at is Kingsbridge’s award-winning status tool. The hybrid approach offers the best of both; a fully automated tool, with manual intervention by our in-house IR35 team for any indeterminate results. Once your status has been assessed, you will get a full report of your engagement.

Buy an assessment here for just £50 plus VAT.

Related topics

Contractors News

You might also like...

Back to resources
Image of a handheld drill on a work bench, representing guide on how to insure work tools for tradespeople
Trades Trades Life 09 Sep 2026

How to insure your tools: a tradesperson’s guide

Most tradespeople spend a lot of time thinking about the next job, the next customer, or the next challenge on…

A flat lay of a desk with stationery and notebook with writing 'insurance checklist', representing guide on questions to ask when buying contractor insurance
Contractor Guides Contractors 24 Aug 2026

7 things to ask before buying contractor insurance

Buying contractor insurance isn’t exactly the most exciting item on your to-do list.  When you’re focused on winning contracts, meeting…

Image of tradesman leaning against white van looking at insurance quotes on his phone, representing article discussing cheap tradesmen insurance
Trades Trades Life 28 Jul 2026

Cheap trades insurance: how low is too low?

When you’re running your own trades business, it’s only natural to try and keep costs to a minimum. But for…

Photo of protest crowd in london, representing article on loan charge review scandal
Contractors News 15 Jul 2026

Why the Loan Charge scandal isn’t going away

In the late 1990s, loan-based remuneration schemes began to emerge before becoming widespread among contractors and freelancers during the 2000s.…

Image of tradesman's arm being bandaged, representing article on employers' liability insurance for tradespeople
Trades Trades Life 07 Jul 2026

Do tradesmen need employers’ liability insurance?

If you’re a tradesman running your own business, you might assume employers’ liability insurance only applies to corporate companies. But…

Contractors News 19 Jun 2026

The tax, pension and savings changes UK contractors need to keep on top of

The 2026/27 tax year might not be bringing one dramatic overhaul, but it marks the beginning of a multi-year shift…

Photo of dug out earth with construction worker on mini excavator, representing article on plant and machinery insurance
Trades Trades Life 01 Jun 2026

What is plant and machinery insurance?

From diggers and dumpers to cement mixers and compressors, plant and machinery are the backbone of many trades. Whether you’re…

Close-up of dates on a green calendar, representing article discussing claims made vs claims occurring in business insurance
Contractor Guides Contractors 26 May 2026

Simplifying insurance: what is claims made vs claims occurring

When you’re choosing insurance, you’ll often come across two terms: claims made and claims occurring. They both refer to the…

Tradesmen tools laid out on table, representing article on tool theft stories and keeping tools safe
Trades Trades Life 20 May 2026

Tool theft stories: tradespeople going beyond locks to keep tools safe

As tool theft continues to dominate headlines and social feeds, many tradespeople are no longer relying on standard security –…

Goodie bag from Powered Now Advice on Tap event, representing article on tradespeoples' concerns about tool insurance claims
Trades Trades Life 15 May 2026

Powered Now ‘Advice on Tap’: trade talk and tool theft troubles

Powered Now’s landmark event brings together tradespeople of all backgrounds. But conversations highlight the ongoing issue of tool theft, the…

Photo of builders discussing construction plans, representing article on what professional indemnity means for tradespeople
Trades Trades Life 28 Apr 2026

What is professional indemnity for tradespeople?

Many tradesmen assume professional indemnity is only for people with a desk job. But in reality, if your work involves…

Image of two builders carrying construction materials, representing article on do subcontrctors need their own insurance
Trades Trades Life 15 Apr 2026

Do subcontractors need their own insurance?

Knowing whether subcontractors need their own insurance can be confusing. Whether working in construction, roofing, plumbing, electrical work or specialist…

Image of construction hard hats representing a guide to what insurance a tradesman needs
Trades Trades Life 31 Mar 2026

What insurance does a tradesman need?

Insurance sounds like a good idea, but how do you know what insurance you need as a tradesman? No two…

Photo of a presentation screen at an event held by Kingsbridge on the JSL legislation and what it means for recruitment agencies
Partner News Partners 30 Mar 2026

What JSL will mean for you: Five lessons from our expert panel

Earlier this month Kingsbridge brought together a panel of industry experts to discuss the implications of the government’s new JSL…

Builder working on a house extension roof, representing a guide to contract works insurance for tradespeople including what it covers
Trades Trades Life 17 Mar 2026

What is contract works insurance?

However big or small your construction project is, contract works insurance could be a lifesaver if something happens. When you’re…

Image of bricklaying representing article on who needs trades insurance and what it covers
Trades Trades Life 10 Mar 2026

Who needs trades insurance?

If you work in the trades, chances are you’ve already heard people chatting about tradesman insurance, but have been left…

Calendar with date circled, representing guide on what a retroactive date is in professional indemnity insurance
Contractor Guides Contractors 26 Feb 2026

Professional indemnity insurance: what’s a retroactive date

Whether you’ve just taken out a professional indemnity policy or you’re shopping for new business insurance, chances are you’ve come…

HMRC Making Tax Digital campaign asset, representing article disucssing the upcoming changes for sole traders April 2026
Contractor Guides Contractors 16 Feb 2026

A ‘Making Tax Digital’ wake-up call for sole traders

The way Britain pays tax is entering its biggest modernisation in a generation, with Making Tax Digital (MTD) for Income…

Photo of HMRC London offices representing article discussing the Employment Rights Act 2025 being law, what changes it brings and what businesses need to do now
Partner News Partners 22 Jan 2026

Employment Rights Act 2025 ‘brings world of work into 21st century’

Big changes to the world of work have been on the horizon for a while and the Royal Assent of…

HMRC Self Assessment tax return letter for 2025 tax year sent to UK taxpayer with UTR and NINO
Contractor Guides Contractors 16 Jan 2026

Online Self Assessment tax return deadline: what to know for 2026 (and beyond)

If you’re required to file a Self Assessment tax return for the 2024/25 tax year, the deadline to submit it…

Contractor Guides Contractors 01 Jan 2026

What is the difference between a sole trader and a limited company?

One of the big questions for any contractor when they first set up as self-employed is whether you should operate as a…

Image of sparks caused by power tools, representing article on what makes a trade high risk for insurance
Trades Trades Life 18 Dec 2025

Trades cover: who’s considered high risk for insurance

If you’re in the trades, you already know the job isn’t without its risks. But did you know those risks…

Image of HMRC building, London, representing article by Roger Sinclair discussing the Finance Bill 2026 and the effects of joint PAYE liability for recruiters
Partner News Partners 15 Dec 2025

The Finance Bill is here: what recruiters need to know now

The Finance Bill was introduced to the House of Commons on 2nd December 2025 and is unlikely to meet too…