Another IR35 lawsuit: this time HMRC loses!

A judgment providing another IR35 victory for the taxpayer has just emerged, although the case was heard at the First Tier Tribunal (FTT) over 18 months ago. The case concerns Armitage Technical Design Services Ltd (ATDSL), the personal service company of Mr Armitage. John Hill represented Armitage at the hearing and both he and Armitage are happy for this case to be reported.

The case took around four years to reach the tribunal. Although the taxpayer and his advisers were convinced that the contracts were not within IR35, they didn’t want the case to drag on, so they offered to settle the tax and NIC due for the two in date years with no penalty. But HMRC refused as it wanted a penalty for negligent conduct on the basis that the taxpayer had not discussed IR35 in sufficient detail with his accountant before the P35s were submitted.

Armitage is an electrical control and instrumentation designer who has worked in the nuclear industry for decades. He contracted through ATDSL and two different employment agencies to provide his services to Diamond Light Source Ltd (DLS).

HMRC asserted that the work Armitage performed over the four years 2009/10 to 2013/14 fell within IR35. During this period Armitage completed several separate projects for DLS and also worked for other customers. The judge examined various indications of employment and self-employment set down in case law and highlighted the following points:

Substitution

DLS would accept a reasonably qualified substitute in the place of Armitage, but this was never tested in practice. The tribunal was satisfied that there was not an absolute requirement for Armitage to personally perform the tasks.