George Mantides Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 June 2019 |
| Date | 13 June 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 387 (TC)
Judge Charles Hellier
The appellant appeared in person
Helen Davies, appeared for the respondents
Income tax and National insurance contributions (NICs) – worker supplied through intermediaries – IR 35 – ITEPA 2003,s. 49 – Whether circumstances were such that had the services been provided under a contract directly with the worker the worker would have been an employee.
The First-tier Tribunal (FTT) found that had services of a locum been provided under a hypothetical contract directly between him and the hospitals, it would have been one of employment at one hospital and self-employment at the other.
George Mantides Ltd (GML) appealed against HMRC determinations under reg. 80 of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) and s. 8, Social Security Contribution (Transfer of Functions etc) Act 1999, for outstanding PAYE of £18,609.20 and Class 1 National Insurance Contributions (NICS) of £11,004.13. The determinations were made in relation to income received by GML for its provision of the services of George Mantides for his work as a locum urologist at the Royal Berkshire Hospital (RBH) and Medway Maritime Hospital (MMH).
Mr Mantides was the sole director and owner of the shares in GML. The issue was whether under the intermediaries legislation in s. 49, ITEPA 2003 (known as the IR35 legislation), Mr Mantides had performed his services under a (hypothetical) contract directly between him and the relevant hospital, and if that contract would have been one of employment, then GML would be liable for NICs and PAYE on the emoluments deemed to have been paid by Mr Mantides.
Mr Mantides's work at RBH and MMH consisted of conducting outpatient clinics, procedures and minor operations. For each clinic there was a list of patients and they would be allocated a 10, or 20, minute interval. The timetable would be adjusted by Mr Mantides according to clinical need. The outpatient's clinic took place on hospital premises in rooms allocated by the hospital management. The surgical work was carried out in a small operating theatre at the hospital with the specialist equipment needed.
In the absence of a formal contract with RBH, the FTT found that the hypothetical contract between RBH and Mr Mantides would have contained the following terms:
- It would have been for a fixed term;
- It would be terminable early on at least one week's notice on either side;
- It would be for the personal services of Mr Mantides and he would have had no right to provide another to step in his shoes;
- It would require Mr Mantides to conduct the services notified to him by the weekly rota in the facilities provided by the hospital;
- It would require him to be available for 10 half day sessions in each week but with the consent of RBH he could take holidays and miss occasional sessions;
- RBH would agree to use reasonable endeavours to provide 10 half hour sessions in each week;
- RBH would pay Mr Mantides the agreed rates per hour worked;
- He would attend specific meetings;
- There would be no entitlement to holiday pay, sickness pay or pension benefits.
The FTT determined that Mr Mantides was required to provide his personal services to RBH and that at least one week's notice would realistically have been required from either party for the termination of the engagement with RBH. These factors pointed towards employment.
Most significantly, the FTT considered there was a sufficient degree of mutuality of obligation between GML and RBH. This was due to its conclusion that the hospital would have been under a duty to use reasonable endeavours to provide 10 half-day sessions of work per week, and that, together with an obligation to work and an obligation to pay for the work done, pointed towards employment.
Taking all of the factors together and standing back, the FTT concluded that had Mr Mantides's services been provided under a contract with RBH he would have been an employee for both income tax and NICs.
The hypothetical contract between MMH and Mr Mantides would have contained the following terms:
- It would have been for a fixed term;
- It would be terminable early on one day's notice on either side;
- It would be for the personal services of Mr Mantides to work as a urologist but permit a substitute to undertake the work if the agency, after consultation with the hospital, considered that the substitute was suitable on the basis of the hospital's usual criteria.
- It would require Mr Mantides (or the substitute) to conduct the services notified to him by the weekly rota in the facilities provided by the hospital;
- It would require Mr Mantides (or the substitute) to be available for 10 half day sessions in each week;
- MMH would have no obligation to provide, or try to provide, any sessions in a week;
- MMH would pay Mr Mantides the agreed rates per hour worked;
- Mr Mantides would attend certain meetings;
- There would be no entitlement to holiday pay, sickness pay or pension benefit;
- Travelling time between the hospital's sites would be paid by MMH. Other travel and accommodation expenses would not be paid.
The FTT found that the circumstances of Mr Mantides's work for MMH differed in three material respects from those of his work for RBH:
- Mr Mantides would have the right to send a substitute if that substitute was suitable on the basis of the hospital's usual criteria.
- The notional contract with MMH could be terminated on one day's notice. The FTT said that one day's notice was almost illusory and did not point to employment.
- The hospital had no obligation to provide to try to provide either 37 1/2 hours or 10 half day sessions in a week. There would not have been even a qualified obligation to provide work. That pointed away from employment.
The FTT concluded that in relation to the MMH engagement the balance lay on the side of self-employment.
The FTT therefore allowed the appeal in relation to Mr Mantides's work at MMH and dismissed it in relation to his work at RBS.
The mutuality of obligation was a significant factor in distinguishing between the FTT's conclusions in relation to Mr Mantides's work at MMH and RBS. RBS would have been under a duty to use reasonable endeavours to provide 10 half-day sessions of work per week, whereas, MMH would have had no such obligation. This raises the question as to why HMRC decided to omit mutuality of obligation from their Check Employment Status for Tax (CEST) tool.
[1] George Mantides Limited (“GML”) appeals against: (i) a determination under regulation 80 of the PAYE regulations assessing PAYE of £18,609.20, and (ii) a decision under regulations made under section 8 of the Social Security Contribution (Transfer of Functions etc) Act 1999 that the company was liable to class 1 National Insurance contributions of £11,004.13.
[2] These determinations and that decision were made in relation to income received by GML in relation to its provision of the services of George Mantides for his work at the Royal Berkshire Hospital (“RBH”) and Medway Maritime Hospital (“MMH”). They were made on the basis that the effect of the intermediaries legislation in section 49ff ITEPA 2003 and those regulations (together commonly known as the “IR35” legislation) was that GML was to be treated as making payments of employment income to Mr Mantides based on the sums received by GML from RBH and MMH, and that GML was as a result liable for PAYE and National Insurance on those deemed amounts.
[3] Mr Mantides is a urologist. He is the sole director of and (I understood) owner of the shares in GML. Between March and August 2013 GML made Mr Mantides' services available to RBH, and between September and October 2013 GML made those services available to MMH. RBH and MMH paid GML for those services.
[4] In outline the IR 35 legislation provides that if the circumstances are such that, had Mr Mantides performed his services under a (hypothetical) contract directly between him and the relevant hospital, and if that contract would have been one of employment, then GML would be liable for NI contributions and PAYE on the emoluments deemed to have been paid to Mr Mantides.
[5] GML contends that the hypothetical contracts would not have been ones of employment. I understood that there was no dispute about the calculation of the amounts involved. This decision therefore addresses only the question of the nature of those contracts.
[6] In the remainder of this decision I shall first discuss the evidence and set out my findings of fact, then address the relevant law, and then reach my conclusions on the appeal.
[7] I heard oral evidence from Mr Mantides and from Benn Best, an NHS manager at MMH. I had a bundle of copy documents which included a contract between MMH and GML for the provision of Mr Mantides' services, two Locum Booking Confirmations relating to his work at RBH, and correspondence between HMRC and Mr Adam Jones, a Consultant Urologist at RBH. Mr Jones told HMRC that he would be unwilling to appear as a witness before the tribunal because he could not remember the details of Mr Mantides' engagement and was not the lead consultant at RBH at the time; I accorded his statements less weight than if he had appeared in person.
[8] Mr Mantides is a Fellow of the Royal College of Surgeons (FRCS). He is a urology specialist.
[9] Between March 2013 and August 2013 he worked as a locum at RBH in its urology department. Between 16 September 2013 and 21 October 2013 he worked as a locum at MMH in its urology department. During 2013/14 he also worked a a locum urologist at The Royal Shrewsbury Hospital.
[10] At both RBH and MMH Mr Mantides's work consisted of conducting outpatient clinics, procedures and minor operations. At RBH he also undertook a small amount of on-call duty.
[11] In an outpatient clinic Mr Mantides would see patients, review their history and any test results, prescribe further steps, for...
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