With HMRC empowered to use the force of law to ensure other parties meet deadlines, it is ironic that HMRC has itself missed a deadline.
HMRC was guilty of an embarrassing oversight by failing to meet the appeal deadline for the decision made by the First-tier Tribunal (FTT) in Mantides v HMRC [2019].
In August 2021, HMRC attempted to appeal the FTT decision on George Mantides Limited (GML) and Medway Maritime Hospital (MMH). GML provided locum services in urology and the FTT concluded the engagement would not fall within the IR35 Legislation. However, HMRC failed to submit their appeal on time and FTT declined to allow an extension. A further application by HMRC was also refused.
To confuse matters, another engagement was also discussed at the FTT between GML and Royal Berkshire Hospital (RBH) in 2019, which resulted in the opposite verdict to the above.
GML appealed this decision on the following grounds:
- The FTT concluded a one-week termination notice period would be required by RBH. There was no evidence to this effect.
- The FTT concluded that in the hypothetical contract there was an obligation on RBH to make available 10 half-day sessions. There was no evidence to this effect.
- As a result of the above, the FTT erroneously concluded that the notional contract would be one of employment and therefore erred in law.
- The FTT did not consider Muschett v HMM Prison Service [2010].
Most cases are determined by the judges on facts presented in documents and evidence to find the irreducible minimum. It is surprising to see such a FTT judgement made on the supposition that factors were present without any clear indication.
It therefore comes as no surprise that the UTT partly disagreed with the FTT. It stated point 1 to be “based more on assumptions ... than evidence as to what actually was agreed between the parties” and there was no evidence to support an obligation on RBH to provide 10 half-day sessions on point 2.
However, UTT omitted point 4 as they stated Muschett v HMM Prison Service did not add anything to the case and, consequently, FTT did not err in law in not referring to the case in its reasoning.
In another turn of events, the UTT will consider point 3 at a subsequent hearing in light of an imminent judgement at the Court of Appeal for Professional Game Match Officials Ltd (PGMOL), which has focused heavily on mutuality of obligations. Both parties accepted that the Court of Appeal judgement could have a substantial bearing on either side of the argument. It is logical to see how such a judgement could have a significant bearing on either party as the main talking point is mutuality of obligations.
The imminent PGMOL judgement could have a detrimental impact on contractors, clients and agencies that have relied on HMRC’s tool to produce a status decision as CEST misses out the very factor – mutuality of obligations - that is prevalent in the courts in recent cases, which could impact status decision.
What we can learn from this case
The importance of having a written contract is the fundamental lesson we can gain from this. A verbal agreement or a document containing minimal details such as a “booking confirmation form” is simply not enough to determine the true nature of the relationship between the parties and to demonstrate the factual information within the agreement. The absence of a written contract means HMRC and the courts must work with assumptions and inference. This case quite clearly shows the differing views that can occur where there is no written contract to establish facts.
This case spotlights the outdated views of HMRC in regards to mutuality of obligations, whereby payment in return for providing services is sufficient to prove it exists. In this case, the UT came to no such conclusion, even though GML had clearly provided services in return for payment.
While this appeal is an undeniable reminder of how important having a written contract is, the case itself, without the final verdict, may be of little value at the present time until we hear how the Court of Appeal judgement sets precedent for mutuality of obligation.
This is not the first time a case has been postponed to wait for another judgement. Ready Mixed Concrete postponed their judgement along with Market Investigations to wait for each other's judgements to be released.
Although the UTT did not reach a final decision, the result appears to be in favour of GML but potentially only half a victory had HMRC appealed on time.
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