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MBF Design Services Limited concerned the supply of design engineering services by Mr Fitzpatrick via his company MBF and intermediaries to Airbus UK Limited.

HMRC argued that the evidence indicated that Mr Fitzpatrick was an employee of Airbus and should be taxed as such.  In particular, they pointed to the fact that during the contractual periods, Mr Fitzpatrick worked a minimum of 35 hours a week, no work was done for others and in view of the hours worked, in HMRC's view, it was unlikely that any such work could have been done; he followed Airbus' instructions as to methods and systems of work; checks were done on his work by Airbus; it was unlikely that he would be able to provide a suitable substitute in his absence; there was no real financial risk for MBF/Mr Fitzpatrick other than the costs of sickness; his pay was a fixed amount per hour; and Airbus provided the equipment he needed for his work.

The tribunal held that a two stage exercise is needed to determine the position.  First, one has to find the facts identifying the arrangements, the circumstances in which they exist and the nature of the services performed.  The second stage is to assume that the individual is contracted to perform services and determine whether (ignoring MBF and any intermediaries) the individual would be regarded as an Airbus employee.

The tribunal held that the overall impression of the arrangements was one of a contract for services rather than a contract of service and the operation of the arrangements in practice did not disturb that conclusion.  Airbus was a "very complex and commercially sensitive undertaking" and so it was not unreasonable for there to be fetters on the ability to substitute and controls over the work product.  Given the complexity of the work, it was not conclusive that work normally had to be performed at Airbus' premises.  Mr Fitzpatrick's starting and finishing times varied day to day and he was paid only for each hour worked and not when the computer system broke down, so his arrangements were not typical of a normal employee.

The decision is not surprising given the case law in this area.  What is surprising is that HMRC chose to take the case in the first place.  This does not appear to be a case where the facts were on the fringes of acceptable IR35 arrangements.

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