A freelancer has been cleared of avoiding tax, while working as a freelance contractor by an employment tribunal.

The long running IR35 dispute was concluded when a tribunal cleared PCG member Mark Fitzpatrick of using his limited company MBF Design Services to avoid tax, while working as a freelance contractor for Airbus.

The tribunal, sitting in Bristol, ruled in favour of Fitzpatrick - noting a lack of ’mutuality of obligation,’ as a significant factor in their decision.  

In concluding 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.

PCG Chairman and OTS consultative committee member Chris Bryce says: “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 Fitzpatrick at the Tribunal, says: “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.

“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.”