Important IR35 Ruling – Contractor Wins 7 Year Battle with HMRC

Important IR35 Ruling
Important IR35 Ruling

Important IR35 Ruling

A contractor has obtained a very important IR35 ruling which will affect all contractors.

A seven-year battle with the taxman has ended in victory for PCG member Mark Fitzpatrick.

The long running IR35 dispute reached a conclusion when a tribunal cleared Mark of using his limited company MBF Design Services to avoid tax. This is in reference to his time working as a freelance contractor for Airbus.

So, the tribunal, sitting in Bristol, found in favour of Mark. They noted a lack of ‘Mutuality of Obligation,’ as a significant factor in their decision.

Cancel Contract

Outlining their conclusion the tribunal observed that Airbus could cancel MBF’s contract without notice.

Specifically, there had been occasions where due to computer failure Airbus sent home contractors without pay. Employees, moreover, had to remain on-site.

Mr. Fitzpatrick relied on tax investigation insurance from PCG to fund his seven-year legal battle. Accountax represented him in court.

Court Decision

Reflecting on the Tribunal decision, PCG Chairman and OTS Consultative Committee member Chris Bryce said: “This is a significant victory for the freelance community with particular emphasis on Mutuality of Obligation. This is a forgotten core principle of being in business.”

Matt Boddington, of Accountax Consulting who represented Mark at the Tribunal, said: “This is a significant bloody nose for HMRC. It highlights, therefore, that if parties arrange their affairs correctly and if these arrangements are an accurate reflection of reality then the IR35 legislation simply will not bite.”

Design Engineer

Mr Fitzpatrick, a freelance design engineer and sole proprieter of MBF Design Services in Bristol, said: “It has been a long and testing journey. However, with the unwavering help and support from all involved justice we have finally achieved victory. I want, therefore, to thank everyone who supported me.”

This case underlines the commitment of PCG in helping members combatting HMRC investigations into freelance contractors.

Other notable successes for members include the 2008 landmark ruling in favour of Arctic Systems. That’s now seen as the roadmap for ‘income shifting’ cases in the sector.

Freelance Contractor

Chris Bryce added: “It has been tough on Mark, a freelance contractor of great integrity. So, we are delighted for both him and his family. It shows yet again that IR35 is wasting taxpayer‘s money in its application to freelancers.

We are working closely with the Office of Tax Simplification to try and bring clarity for the freelance community.”

Thi is an important IR35 Ruling for all contractors.