The latest IR35 ruling given by the First-tier Tax Tribunal found one of George Mantides' contracts ‘inside’ and the other ‘outside’ of the Intermediaries Legislation.
During my time at Qdos, I provided the contractor in this case, George Mantides, with several pieces of ad hoc advice in the lead up to his company’s appeal hearing, providing him with answers to specific employment status questions and opinion, as well as directing him to relevant case law. George was determined to conduct his own defence and researched IR35 well, enabling him to piece together a case that, partly defied the odds, so I congratulate him on a noble effort.
George Mantides (GM) is a urologist who operates through his own PSC, George Mantides Ltd (GML). During the periods March – August 2013 and September – October 2013, GML provide urology services to the Royal Berkshire Hospital (RBH) and Medway Maritime Hospital (MMH) respectively. At both hospitals the work consisted of conducting outpatient clinics, procedures and minor operations. At RBH, the locum also undertook a small amount of on-call duty.
Why would George Mantides be affected by IR35?
The hospitals used locums to cover for missing manpower and to catch up on compliance with government waiting time targets, i.e. people who had been waiting for more than 6 months, and those who had to be seen within 2 weeks after a suspected cancer diagnosis.
GM's Outpatient clinics
During these clinics, which took place at the hospitals, GM would see patients, review their history and any test results, prescribe further steps, e.g. discharge, medication, x-rays, endoscopy or cancer surgery and dictate letters to the patients’ GP’s.
For each clinic, GM would be given a list of patients and each would be allocated 10 – 20 minutes. However, GM could adjust the timetable according to clinical needs and he would take breaks at his discretion.
Other than cancer diagnoses, none of GM’s advice and recommendations were subject to review by other members of the department.
Whilst conducting sessions, GM would have use of any hospital equipment that was required and the help of nursing staff.
GM's Surgical work
GM would be provided with a list of 10 – 12 timetabled patients for his allocated surgery sessions. On average the procedures took 10 – 15 minutes per patient and, again, GM could adjust the timetable as he saw fit.
Surgery work was conducted in a small operating theatre within the hospital, decked out with expensive specialist equipment. The theatre was attended by nursing staff who managed the equipment and assisted GM.
GM attended only one regular mortality and morbidity meeting at which any complications that had arisen would also be discussed. It was vital to GM retaining his GMC registration that he attended these meetings as failure to do so would mean he was likely to fail the GMC’s quality test.
Whilst GM agreed that if he had doubts about a particular case he could, as any reputable clinician would, speak to a consultant, he did not recall ever having to do this.
RBH had told HMRC that GM’s work was checked “from a distance”, meaning that whilst there was no direct supervision of the way GM conducted clinics and operations, consultants would receive feedback from nurses, secretaries and theatre staff so that “repeated concerns would be raised”.
An NHS manager at MMH told the Tribunal that GM was “overseen by the urology consultants”. GM would see patients under the name of one of the consultants with responsibility for GM. Whilst GM was not closely supervised, nevertheless, there would be a supervising consultant.
The judge concluded that, given GM’s expertise, there was almost no direct oversight of his work. GM did not report to anyone on a daily basis and there was no programme of audit or review. There was no indication that he would be directed how to perform any part of his work.
George Mantides' hypothetical contracts from IR35 perspective
In constructing the fictional contract between the parties, the judge decided that this would have looked like:
RBH – caught by IR35
Mutuality of obligation (MOO)
In deciding that this contract of GM's fell foul of IR35, the judge found that the hospital would have been under a duty to use reasonable endeavours to provide half-day sessions of work during the period of the contract and that, when coupled with the obligations to work and to pay, this was sufficient to satisfy the requirement for mutuality which, in turn, pointed towards employment.
GML could not discharge its contractual obligations in any way other than GM carrying out the services and therefore this was a pointer towards employment.
Although GM was subject to a measure of control by the hospital it did not control all aspects of his work.
Sessions would have to be conducted in accordance with the hospital rota and at the hospital itself which amounted to a degree of control over what GM did and when he carried out the work. Nevertheless, it was only a weak pointer towards employment.
Although GM’s work was not closely supervised the judge favoured HMRC’s view of the ‘how’ aspect of control, ie that when the worker is an expert professional then this part of the test cannot be decisive.
Taking all the four sub-tests of control into consideration, the Tribunal decided that the degree of control that would actually be exercised over GM was a neutral factor.
During the year ended 5th April 2014, GML provided its services to three successive hospitals but this was not considered to be a pointer towards self-employment.
That GML used the hospital’s equipment and also staff was considered a weak pointer towards employment.
GML negotiated its own fee rates and met its own costs of training, compliance with GMC registration requirements, and travel and accommodation when GM worked away from home. The company was paid by reference to an hourly rate, so if less than 37 ½ hours were worked during a week then income would be down. Conversely though, working hours in excess of 37 ½ would generate greater fees. The judge considered that all these risks were the same as a salaried employee and were only a weak pointer towards self-employment.
HMRC attempted to argue that if GM were directly employed by the hospital then he would not need to bear the cost of insurance since he would by covered by the NHS indemnity scheme. Whilst the judge rejected this view he did not consider that the matter of professional indemnity insurance strengthened the self-employment argument.
Despite a Locum Booking Confirmation giving instructions to “carry on as usual” and GM undertaking some on-call work, this did not suggest the contractor was part and parcel of the hospital organisation. GM neither trained nor managed others, and only attended one regular meeting. Overall, this factor pointed weakly towards employment.
The Tribunal did not consider one week’s notice to be an indicator of self-employment.
The lack of these benefits pointed away from employment. Although the rate of pay was said to include holiday pay, this was only seen as an element of pay for hourly work and was not pay for not working.
MMH – not caught by IR35
There were circumstances of this engagement which were the same as those of the RBH contract but three material differences enabled the Tribunal to reach a different decision:
- GML possessed a real right of substitution;
- The contract could be terminated by one day’s notice; and
- MMH would not have been obliged to try to provide GML with either 37 ½ hours or 10 half day sessions in a week, therefore MOO was absent.
The total tax and NIC at stake was nearly £30K but we do not know the exact split between the two contracts. Given that the RBH contract was for a longer period, it is reasonable to assume that this gave rise to the lion’s share.
Medical contractors working in a hospital setting are likely to find it more difficult to fend off IR35 because of the controlled environment they operate in. So, set against this backdrop George did well to achieve a partial success. He might have spent a few pounds on professional advice but he had nothing to lose as he was prepared to take on HMRC in the arena of the tribunal. For this and his gutsy performance, I salute him. Whether or not a one hundred per cent success rate could have been achieved if GML had held tax enquiry insurance, that would have covered the costs of professional representation costs, is a matter of speculation but for a small premium, it gives a contractor some reassurance and comfort.
The full transcript of the case can be found by visiting here.
Additional IR35 notes
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