IR35 defeats for HMRC

There have been two recent defeats for the Taxman in respect of IR35 court cases – Marlen and Primary Path.

In Marlen, the contractor’s flexible working arrangements (hours, holiday, absences) were found to be a key differentiator from employees of the end client along with the very low level of control that was exercised over the contractor by the end client.

HMRC argued that there was a mutuality of obligations but the court found otherwise, citing early termination of some of the contracts in question and one instant were the contractor was sent home without pay when the computers all went down.

With Primary Path, the contractor won when the court concluded that the services were carried out with very little involvement of the client (thus again confirming that degree of control is an important factor).  The court also noted that the ability to propose a substitute was inconsistent with IR35.

Finally, the court said that it was important that the contract between the contractor and the agency was also reflected in the contract between the agency and the end client.  This last point can be an unknown as often the agency-end client contract is not seen by the contractor until everything goes to court.


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