Taxman dubbed “shambolic” after submitting an appeal application late in a long-running IR35 case
HMRC missed the deadline to appeal locum doctor George Mantides’ partial IR35 case victory, according to an Upper Tier Tribunal (UTT) judgement published last week.
It stated that the tax watchdog had “sought permission” to appeal against a First Tier Tribunal (FTT) decision in 2019 that found the services Mantides provided Medway Maritime Hospital in 2013 fell outside IR35.
However, its application was “submitted late and the FTT declined to grant an extension of time.”
“A further application by HMRC to this tribunal [UTT] was refused both on the papers and subsequently following an oral hearing,” the judgement reported.
HMRC ‘struggles’ to identify whether contracts are inside IR35
Seb Maley, CEO at Qdos, said in response: “That HMRC missed the deadline to appeal the contract Mantides held with Medway Maritime Hospital [MMH] tells you everything you need to know about the efficiency of the tax office.
“Not only does HMRC regularly struggle to identify if a contract belongs inside or outside IR35, but they aren’t organised enough to lodge an application to appeal despite it being something as significant as an Upper Tier Tribunal. It’s shambolic.”
While HMRC were due to appeal the MMH verdict, Mantides appealed an FTT ruling which found his services to Royal Berkshire Hospital (RBH), provided via his limited company – George Mantides Ltd – were inside IR35 and therefore liable for Income Tax and National Insurance contributions.
No sufficient evidence for FTT ruling
The UTT found that there was not sufficient evidence for the FTT to come to its conclusion that Mantides’ contract with RBH fell inside IR35.
The judgement said that the UTT was satisfied there “there was nothing in the evidence to support the FTT’s conclusion as to the notice period and the obligation on RBH to provide work to Mr Mantides.”
However, it has delayed reaching a verdict, citing it is waiting for the outcome of another tax case recently heard by the Court of Appeal – PGMOL vs HMRC.
The key issue in this £584,000 employment status case involving professional football referees is Mutuality of Obligation (MOO).
Decision on MOO could set precedent for other IR35 cases
HMRC is maintaining its long-standing view on MOO, which is that it simply means an individual gets paid for doing some work.
But the UTT clarified the concept of MOO in the PGMOL case, claiming it actually refers to obligations on both parties – the client to provide work and pay for it, and the contractor to do the work and get paid for it.
If the Court of Appeal upholds the UTT decision it could have a significant impact on not just the Mantides case, but other IR35 rulings, as Qdos’ Seb Maley explained:
“It shows how important the upcoming PGMOL verdict may prove to be. This decision is imminent, could impact the outcome of several cases and prove that HMRC’s view of one crucial aspect of IR35 case law doesn’t stack up.
“If it’s found that Mutuality of Obligation doesn’t exist, then HMRC’s IR35 tool, CEST, is fundamentally flawed and hundreds of thousands of IR35 decisions it has made will be questioned.”