HMRC IR35 defeat – What You Need To Know

24 May 2018

A contractor has successfully beaten HM Revenue and Customs in a tribunal court case which has drawn attention back on the inefficiency of current HMRC IR35 legislation in the UK.


Wondering what HMRC IR35 is? Read Here First




HMRC IR35 defeated – MDCM Vs. HMRC

Mr Daniels ran a construction management firm called MDCM with his wife, in which they were both directors and the only employees of their company.

In 2016, HMRC carried out an investigation on the business, in which they decided that a contract between MDCM and a client should have been within the scope of IR35.

HMRC- HM Revenue & Customs

When the inspector looked into Mr Daniels’ working relationship with his client, they ruled that he was in fact operating as an employee of the company.

However, the investigation turned up conflicting evidence. HMRC’s decision was based on a number of factors including a lack of financial risk in taking on the contract.

Yet Mr Daniels also received a day rate for his services, was required to pay for his own travel and expenses and was no more controlled by the client than any other contractor was.

When HMRC made their ruling that IR35 should be applied, Mr Daniels took the case to the First Tier Tribunal. Representing himself against the top solicitors of the government tax authority, Daniels won.



Defeat – HMRC’s decision overruled in court

At the tribunal, the court looked through the contracts between MDCM and a number of the company’s clients and compared them against HMRC’s hypothetical contract.

Whilst the court did not agree with HMRC’s argument that Mr Daniels was controlled by the client, they did note that the personal service requirement and lack of financial risk showed signs of an employer/employee relationship.

Image of people in a courtroom.

However, the final verdict stated by the Tribunal Judge was that “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. Further, Mr Daniels was not treated as an employee.”

IPSE Deputy Director of Policy and Public Affairs Andrew Chamberlain went on to say that whilst the court’s verdict may be good news for Mr Daniels, it only highlights how overly complex and uncertain the IR35 legislation really is.

HMRC looked at all the relevant information around the case and decided that IR35 should apply whereas the tribunal viewed the exact same information and decided that it should not.


“If HMRC, with all its expertise seemingly cannot make a correct determination, how are public authorities and individual businesses supposed to get it right?”

says Chamberlain.


“If the Government extends the ill-judged IR35 changes it made to the public sector last year to the private sector, the chaos and uncertainty is only going to intensify.”



HMRC IR35 defeat – speak to your Maple accountant

If you’re a contractor and are concerned that IR35 may apply to you, get in touch with your Maple accountant today. We’ll be happy to help you define how your employment status made be viewed when considered against HMRC’s standards as best we can, and be here to offer our professional guidance should you come under later investigation. Please email us at or call our head office on 01332 207 336

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