IR35 Case: Primary Path Ltd v HMRC [2011] TC 01306


    Accountax Consulting successfully defended Primary Path Limited against IR35.
    The company was set up by director/shareholder Phil Winfield in 2000 to provide software development in the Pharmaceutical Industry, primarily Oracle Database software development.
    Primary Path had a website and had concurrent contracts with other clients during the period under appeal, and was engaged to provide services in respect of the design and build of a specialist interface.
    The Tribunal’s task was to determine whether the services Primary Path Limited supplied to GSK on a specific project, via agencies, were subject to the IR35 legislation.
    The case was heard in April 2011 by Judge Edward Sadler.


    This appeal concerned the services carried out by Phil Winfield on behalf of his company Primary Path to GSK on two separate and distinct projects which were seven months apart from one another.
    The first project was to create an interface between several in-house medical dictionaries and external industry dictionaries.  GSK had no employees with this knowledge and only required such skills for this specific project.  It was for Mr Winfield to determine how to carry out and manage his part of the project and report progress to GSK. He determined his own hours albeit he was to work within a timeframe the timetable for which was borne out of the overall project.
    The first part of the work involved Mr Winfield designing a document setting out the plan for the design and build of the interface, which was designed with little input from GSK.  There was little involvement with GSK employees in respect of the technical aspects of work undertaken generally.
    The second project was less specialised and was to develop an Oracle interface.  This was the initial stage of a larger project, which once Primary Path had completed would be handed over to other consultants and contractors to complete the project.
    Mr Winfield worked with one other contractor on this discrete part of the project, with limited interaction between him, the project co-ordinator and the rest of the team in terms of the technical aspects of the work.
    Consideration of a temporary replacement/substitute never arose, although substitution had occurred on contracts Primary Path had with other clients.
    During the projects there was a change of agency, but for the most part the contractual terms were similar.
    The contract between GSK and the agencies:
    • allowed the consultant time off provided 10 days’ notice was given, enabling the agency to offer a substitute to cover any periods of absence. More generally they could offer a substitute at any time provided they met the agreed specification and was accepted by GSK;
    • said GSK may require the agency to terminate a consultant;
    • the consultant could work for others during any engagement; and
    • the agency must enter into terms with the consultant to reflect those of this contract;
    • in addition the contract with the second agency said the individuals were not employees or subcontractors of GSK and that GSK had no right to control the manner, means or method by which the agency provided services, save that GSK was entitled to direct where and when the services were provided (there was a corresponding provision in the contract between the agency and Primary Path).
    It was found as fact the services were carried out with little involvement of the client, other than being checked for standard and quality requirements. The Judge said it was clear Mr Winfield had responsibility for delivery of his part of the project.
    An issue commented on by the judge in this case, and one which Accountax advises its clients about on a regular basis, is consistency between the terms of the contract between the agency and the taxpayer and the agency and the client.  All too often in IR35 cases where there is an agency in the contractual chain you are faced with inconsistencies between the contracts which can protract HMRC’s enquiries.
    In the current case the Judge said there was a ‘fair degree of consistency’ between the various contracts/correspondence in place between the parties, which somewhat eased the road to constructing a hypothetical contract in this case.
    During the first project Mr Winfield worked to secure a contract with the US company involved in the GSK project.


    As with other cases the Tribunal took Ready Mixed Concrete as their starting point, examining the irreducible minimum, before considering the other in business factors.


    Applying the facts of this case to the seminal case of Ready Mixed Concrete, the Tribunal said the ‘level of control or supervision did not go beyond that which one would expect in the hiring of an independent contractor’, there was no obligation beyond paying for work done and that the ability to propose a substitute was inconsistent with employment.
    The Judge concluded the position was even more telling when applying the in business on account test, mentioning in particular the work secured with the US company during the first project with GSK, and that it was clear the relationship between Mr Winfield and GSK was one for independent services.
    For the full judgement click here.