Freelancer Wins Seven Year Battle with HMRC in Significant IR35 Ruling

Tribunal cites lack of ‘mutuality of obligation’ as key to ruling in favour of taxpayer.

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 (MBF) to avoid tax, in reference to his time working as a freelance contractor for Airbus.

The tribunal, sitting in Bristol, found in favour of Mark - noting a lack of ‘Mutuality of Obligation,’ as a significant factor in their decision.

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, contractors were sent home without pay whereas employees had to remain on-site.

Mr. Fitzpatrick relied on tax investigation insurance from PCG (an association that supports the freelance community in the UK) to fund his seven-year legal battle and was represented in court by Accountax.

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- 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 and highlights 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.”

Mr Fitzpatrick, a freelance design engineer and sole proprieter of MBF Design Services in Bristol, said: “It has been a long and testing journey but with the unwavering help and support from all involved justice has finally been achieved, I want 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, now seen as the roadmap for ‘income shifting’ cases in the sector.

Chris Bryce added: “It has been tough on Mark, a freelance contractor of great integrity and 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.”

News Source: PGC Press Office

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