A contractor for the UK construction industry has successfully appealed against a ruling by Her Majesty’s Revenue & Customs (HMRC) that he was an employee, after a first-tier tribunal found he had not been employed for IR35 tax benefit purposes.
Quantity surveyor Mark Daniels set up MDCM Ltd, a small organisation providing construction and management services, in 2004. He worked with Solutions Recruitment Ltd, which placed him on a contract with construction company Structure Tone Ltd (STL) as a night shift manager in October 2012. Daniels worked full-time in this role across two sites for STL until July 2013.
According to People Management, HMRC claimed that, under the IR35 tax rules, the working relationship between Daniels and STL was one of employment, which meant he should be taxed as an employee.
Under the off-payroll intermediaries legislation introduced by HMRC in 2016, an individual should not be taxed as an employee in cases where they work through a third-party intermediary rather than directly for a client.
HMRC argued that Daniels would have worked under a direct contract with STL were it not for the existence of MDCM because his personal services were required to carry out the job, and neither MDCM or Daniels incurred any financial risk as a result of the contract, making STL effectively his direct employer.
But Daniels argued that despite being expected to work in shift patterns set by STL, the situation did not constitute “control”, as all construction sites are run in this way. The tribunal agreed that: "STL did not exercise any more control on the site than they would over an independent contractor."
The tribunal also added that Daniels was given no notice when his contract was terminated and he was not entitlement to severance pay. He also paid for his own travel, hotels and other expenses.
The tribunal judge said: "We do not accept HMRC’s arguments about control but do agree that the requirement for personal services and lack of financial risk point to an employment relationship. However, we find that the nature of the payment arrangements – a flat rate per day with no notice period and no entitlement to any employee benefits – are inconsistent with employment.”
Moreover, Daniels was not treated as an employee. As a result, the judge said: “On balance, we find that under the hypothetical contract required by the intermediaries legislation, Mr Daniels would not be on an employment contract and so this appeal is allowed."
A survey from Qdos Contractor recently found that 89% of freelancers and contractors would like to be offered employment rights when working under the terms of off-payroll legislation.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
A contractor for the UK construction industry has successfully appealed against a ruling by Her Majesty’s Revenue & Customs (HMRC) that he was an employee, after a first-tier tribunal found he had not been employed for IR35 tax benefit purposes.
Quantity surveyor Mark Daniels set up MDCM Ltd, a small organisation providing construction and management services, in 2004. He worked with Solutions Recruitment Ltd, which placed him on a contract with construction company Structure Tone Ltd (STL) as a night shift manager in October 2012. Daniels worked full-time in this role across two sites for STL until July 2013.
According to People Management, HMRC claimed that, under the IR35 tax rules, the working relationship between Daniels and STL was one of employment, which meant he should be taxed as an employee.
Under the off-payroll intermediaries legislation introduced by HMRC in 2016, an individual should not be taxed as an employee in cases where they work through a third-party intermediary rather than directly for a client.
HMRC argued that Daniels would have worked under a direct contract with STL were it not for the existence of MDCM because his personal services were required to carry out the job, and neither MDCM or Daniels incurred any financial risk as a result of the contract, making STL effectively his direct employer.
But Daniels argued that despite being expected to work in shift patterns set by STL, the situation did not constitute “control”, as all construction sites are run in this way. The tribunal agreed that: "STL did not exercise any more control on the site than they would over an independent contractor."
The tribunal also added that Daniels was given no notice when his contract was terminated and he was not entitlement to severance pay. He also paid for his own travel, hotels and other expenses.
The tribunal judge said: "We do not accept HMRC’s arguments about control but do agree that the requirement for personal services and lack of financial risk point to an employment relationship. However, we find that the nature of the payment arrangements – a flat rate per day with no notice period and no entitlement to any employee benefits – are inconsistent with employment.”
Moreover, Daniels was not treated as an employee. As a result, the judge said: “On balance, we find that under the hypothetical contract required by the intermediaries legislation, Mr Daniels would not be on an employment contract and so this appeal is allowed."
A survey from Qdos Contractor recently found that 89% of freelancers and contractors would like to be offered employment rights when working under the terms of off-payroll legislation.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
