IR35 Upper Tribunal: George Mantides Limited vs HMRC
Mantides, a contractor urologist, operates through his own Personal Service Company, George Mantides Ltd (GML). From March-August 2013 and September-October 2013, GML provided urology services to the Royal Berkshire Hospital and Medway Maritime Hospital respectively. At both hospitals, the work consisted of conducting outpatient clinics, procedures and minor operations. At Royal Berkshire Hospital, the locum also undertook a small amount of on-call duty.
Mantides First-tier Tribunal resulted in split IR35 decision
The hospitals used locums to cover for missing manpower and to catch up on compliance with government waiting time targets, for example, people who had been waiting for more than 6 months, and those who had to be seen within 2 weeks after a suspected cancer diagnosis.
The First-tier Tribunal found that the contracts with Royal Berkshire Hospital and Medway Maritime Hospital were ‘inside’ and ‘outside’ IR35 respectively, and in constructing the fictional contract between the parties, the judge decided that this would have looked like:
Mantides contract failed in Mutuality of Obligation (MOO)
In deciding that the contract fell foul of IR35, the judge found that the hospital would have been under a duty to use reasonable endeavours to provide half-day sessions of work during the period of the contract and that, when coupled with the obligations to work and to pay, this was sufficient to satisfy the requirement for mutuality which, in turn, pointed towards employment.
HMRC filed too late
HMRC sought permission to appeal against the outside IR35 decision relating to the Medway Maritime Hospital contract, but its application for permission was submitted late and the First-tier Tribunal declined to grant an extension of time in which to make the application.
A further application by HMRC to the Tribunal was refused both on the papers and subsequently following an oral hearing. In contrast, George Mantides has succeeded in persuading the Upper Tribunal that the First-tier Tribunal erred in law in respect of the Royal Berkshire Hospital decision for the following reasons:
1. The hypothetical contract would have contained a provision that Royal Berkshire Hospital would have to give at least a week’s notice to terminate it early;
2. Under the hypothetical contract, Royal Berkshire Hospital would have been under an obligation to use reasonable endeavours to provide 10 half-day sessions in a week.
How Professional Game Match Officials Limited could impact the case
As these elements feed into the issue of MOO, an appeal will be heard for Mantides once the Court of Appeal releases its decision in the appeal case of Professional Game Match Officials Limited (PGMOL). In PGMOL, it was originally held that to establish MOO it is necessary for there to be an obligation on the employer to provide work (or at least a retainer or some form of consideration in the absence of work). HMRC disputes that test on appeal and pointed out to the Upper rTibunal that, at the very least, it is to be expected that the Court of Appeal will provide guidance on the application of the MOO test in this context.
If HMRC loses their appeal in PGMOL and decides not to appeal to the Supreme Court, then this could open the flood gates for many contractors in all sectors to point to an absence of MOO in their contractual and working arrangements that breaks the ‘disguised employee’ chain. For those organisations having to consider the off-payroll rules and have relied on CEST to make their status determinations, they may be faced with subsequent disputes from freelancers.
Contractors should keep evidence in the event of IR35 enquiry
The Upper Tribunal acknowledged that the evidence before the First-tier Tribunal, in particular contemporary documentation, was distinctly lacking and incomplete. It’s another sobering reminder to contractors to assemble dossiers of status evidence when working on contracts to expedite IR35 disputes when challenged by HMRC.
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