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In brief

The Upper Tribunal upheld a First Tier Tribunal decision that a project manager was within IR35 as he would have been an employee if he had been engaged directly. The case (Northern Light Solutions Limited v Revenue and Customs [2021] UKUT 134 (TCC)) relates to the pre-6 April 2021 position according to which it was for the contractor to determine whether he was inside or outside IR35.  This decision will also be relevant for companies now trying to determine whether contractors are inside or outside IR35 from 6 April 2021.  This case indicates that a relatively low threshold for mutuality of obligation is sufficient for a contractor to be within IR35.


  2. In moredetail


  • A sufficient level of mutuality of obligation is one factor indicating that someone should be within IR35 and taxed as an employee.
  • HMRC’s view appears to be that mutuality of obligation is assumed almost as soon as a contract is entered into between two parties.  This is reflected in the CEST tool, which does not have any questions addressing mutuality of obligation
  • The Upper Tribunal’s decision appears to support the position that the threshold for mutuality of obligation is low.

HMRC has also updated its Employment Status Manual with guidance on how it views presenters following the recent decisions in this sector.

In more detail

A contractor providing project management services through his personal services company has lost his appeal to be taxed as self-employed (i.e. outside of IR35).  The contractor worked for one engager for 9 months on a project, had a break of about 5 months and then returned for another project with a contract lasting over 18 months.

  • The contractor argued that because the contracts related to specific projects and there was no obligation for the engager to provide work or a different project once the first finished, that there was insufficient mutuality of obligation to determine that the contractor would have been taxed as an employee if engaged directly.
  • The tribunal found that the contractor was required to work during the period of the contract and that this was sufficient to show mutuality of obligation.  The tribunal indicated that the fact that a contractor may not be offered further work once a contract ended was not sufficient to escape IR35.
  • This indicates that for contractors who jump between projects, the uncertainty of where future work will come from is not determinative that they will be outside IR35.  The way in which they work during each contract must be assessed.

HMRC has updated its guidance on determining the status of presenters following the recent cases in this area.  Interesting points to note from this guidance includes:

  • Financial risk – in keeping with HMRC’s position on mutuality of obligation above, HMRC’s view is that a contractor must be at risk of financial loss in order for this to point towards self-employment.  The risk of not being provided future work is not considered by HMRC to be a financial risk.
  • Right of first call – this is common in the media sector and HMRC’s guidance recognizes that there is a sliding scale between requiring someone to work specific days every week and agreeing to work ad hoc days as agreed in advance.  How long the right of first call lasts, is also an important factor to consider.
  • HMRC considers that prohibiting a contractor from working for a competitor or requiring prior approval for other engagements suggests that the contractor is within IR35 and should be taxed as an employee.  However, simply requiring the contractor to inform the engager (where the engager has no right to object) is considered by HMRC to be neutral.

If you have any questions about how contractors should be taxed and your obligations as an engager, please do reach out to a member of the London Employee Benefits team.


Jeremy Edwards is a partner and the head of the Employee Benefits Group in Baker McKenzie’s London office. He advises on all aspects of employee share plans and employee taxation. Jeremy has over 20 years’ experience as a share plan lawyer and two years’ experience as a corporate lawyer. He is currently serving on the advisory panel of ProShare and is a regular speaker at share plan conferences held in the United Kingdom.


Stephen Ratcliffe is a partner in Baker McKenzie's Employment and Benefits practice in London. He has more than 14 years of legal experience and was recognized as an "Associate to Watch" by Chambers & Partners in 2014, 2015 and 2016 before his promotion to partnership. Stephen has been described as "very precise, technically excellent, but also very practical."


Gillian Murdoch is an associate in Baker McKenzie's London office. Gill qualified in the employee benefits team in 2014 after joining the firm as a trainee in 2012. Gill was named as a "Next Generation Lawyer" by Legal 500 in 2017.

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