Home / CEST accuracy study / Mark Fitzpatrick, design engineer at Airbus

Mark Fitzpatrick, design engineer at Airbus

MBF Design Services Limited v The Commissioners for HMRC · [2011] UKFTT 35 (TC) · First-tier Tribunal, 2011 · read the judgment

The tribunal held that the hypothetical contract between Mr Fitzpatrick and Airbus would have been a contract for services rather than a contract of employment, the arrangements giving rise to "the reality of a relationship ... typical of that in a contract for services". Appeals allowed.

The tribunal held

Outside IR35

CEST returned

Outside IR35

Agreed with the tribunal

Our engine scored

51/100

Predicts outside. Agreed with the tribunal

Our score is a 0 to 100 probability of being outside IR35, read as "outside" at 50 or above.

Why this is a Chapter 8 case

The appeal was against a section 8(1)(m) decision issued under regulation 6(4) of the Social Security Contributions (Intermediaries) Regulations 2000, together with regulation 80 PAYE determinations. At paragraph 4 the tribunal framed its task as applying the statutory hypothesis to establish whether, had the arrangements with Airbus taken the form of a contract between Mr Fitzpatrick and Airbus, he would have been an employee. That hypothetical contract exists only under the intermediaries legislation, which is what makes this a Chapter 8 status case rather than an agency case under section 44.

Every answer, and why

This is the contestable part of the study. Each row is a question CEST asks, the option we chose, and the finding in the judgment that drove it. Confidence in this encoding is recorded as high.

If you think an answer is wrong, it is a specific row you are disagreeing with, which is the point of publishing them.

Personal Service

Has a substitute ever actually worked in your place on this engagement?

No substitution has happened on this engagement

Paragraph 26: "In practice, there was never any question of providing a substitute for Mr Fitzpatrick", though he asserted the Morson-Airbus contract entitled Airbus to accept one. No substitution occurred.

If you needed to send a substitute, could the client reject them?

Yes — the client could reject a substitute, or has an approval veto

Paragraph 26: substitution "would not have been impossible to organise", but "if he sent a substitute, a complaint would have been made to the agency because Airbus wanted Mr Fitzpatrick’s services specifically", and Airbus would normally want to vet the CV of anyone doing work for them. Encoded as a client that would reject.

Control

Can the client move you to different tasks or work areas on this engagement?

Yes, without needing my agreement

Paragraph 61: each contracted worker had "neither a specified rôle in the company nor a particular line of duty beyond what was for time being allocated by the permanent staff". Paragraph 33: team leaders gave instructions "as to what should be done next or as to the work priorities". Paragraph 16 records him being reallocated between purchase-order groups mid-contract.

Who decides how you do your work — the methods and approach you use?

I agree how to do it with others (client team, colleagues)

Paragraph 33: Airbus "would not control the precise manner of the work". Paragraph 30: "It was up to the designer to do the detail of the design", and the checking was "not therefore primarily for the purpose of quality supervision but more as part of the team leader’s task of co-ordination". Paragraph 31 describes concurrent engineering, in which designers adjust their work to each other. Encoded as agreeing the approach with others rather than deciding it alone.

Who controls when you work — the days and hours?

I agree my schedule with the client

Paragraph 38: he "came and went when he chose, but that he kept Airbus informed of what he was doing", starting anywhere between 6.30am and midday. Paragraph 39 finds core hours were "strictly speaking a definite requirement" by Airbus but were not enforced where co-ordination was achieved. Encoded as agreeing the schedule rather than deciding it alone, because the co-ordination requirement was real even though unenforced.

Who decides where you carry out the work?

I cannot choose — I must work at the client's location

Paragraph 35: work was "usually, but not invariably" at Airbus’s Filton site, for security reasons and because it required logging into Airbus’s computer and design facilities. Paragraph 64: it "had normally to be performed on site and with Airbus’s equipment because there was no other sensible way to do it".

Financial Risk

Did you purchase and supply significant raw materials for this work?

No

Did you provide significant specialist equipment of your own for this work?

No

Paragraph 64 records the work being done "with Airbus’s equipment", and paragraph 35 that it involved logging into Airbus systems on site. Paragraph 46 records Airbus training him on its CADD system at Airbus’s expense because Airbus specified the software to be used.

Did you use your own vehicle as a primary work tool on this engagement?

No

Did you incur significant other work-related expenses at your own risk?

Yes

Paragraphs 44 and 45: specialist training was "done at Mr Fitzpatrick’s expense and in his own time", he was self-taught on the Primes database, and he paid to be trained on CATIA v5 by IBM rather than by Airbus. Clause 5.1 of the first-level contract required MBF to keep operatives trained "at the cost of [MBF]" and clause 5.2 to "rectify at its own cost any defective work".

Are significant work expenses simply not applicable to this type of role?

No — expenses could be relevant but I didn't have them

How are you mainly paid for this work?

Per time period — a weekly or monthly rate

Paragraph 7: hourly rates of £21.47 for the initial 35 hours a week and £22.34 above that. Paragraph 42: "MBF issued weekly VAT invoices to GED referable to the number of hours Mr Fitzpatrick had worked in the week." Paid per unit of time rather than a fixed price for the job.

If you delivered substandard work, what would happen?

I would fix it in my own time at no extra charge to the client

Paragraph 32: if his work "was technically at fault, it would be for him to correct it at his own expense and not as a charge to Airbus", and he had sometimes done so on his own initiative. The same paragraph distinguishes rework caused by another designer, which Airbus would pay for.

Integration

Do you receive employee-type benefits from the client?

No

Paragraph 42: "There was no holiday pay or sick pay for Mr Fitzpatrick or his fellow contractors", and they were not entitled to the Airbus employee benefits, of which 25 were listed in evidence, nor to staff social events. Paragraph 40 records contractors being sent home unpaid during a power outage while employees stayed on site.

Do you manage any of the client's employees — acting as their line manager?

No

No finding that Mr Fitzpatrick managed anyone. Paragraph 20 records Mr Pham as a lead designer who led employed designers and was responsible for up to 40 contracted designers including, for part of the period, Mr Fitzpatrick, so the supervisory line ran towards him rather than from him.

Do you have direct contact with the client's customers or end clients?

No

No finding of contact with Airbus’s customers. The judgment describes design work validated against the requirements of aviation authorities for certification, which is a regulatory approval route rather than contact with the client’s own customers.

Ongoing Obligation & Business Independence

Is the client obliged to offer you work, and are you obliged to accept it, throughout this engagement?

No — either party can stop without obligationCEST does not assess this

Paragraph 59: "There was no stated obligation for Airbus to offer a particular amount of work to any individual." Paragraph 60 finds "an absence of the mutuality of obligation needed for a contract of employment to exist". Paragraph 40: during a computer outage contractors "found themselves stood down and unpaid".

When this contract ends, would you be surprised if the client did not offer you more work or extend?

No — each engagement is discrete and self-containedCEST does not assess this

Finely balanced, and the most contestable answer in this case. MBF supplied Mr Fitzpatrick to Airbus across successive contracts covering 2001-02 to 2006-07, which on its own suggests an expectation of continuation. Encoded false on the tribunal’s own characterisation at paragraph 61 that "Each contracted worker was fundamentally insecure", and on paragraph 43, where Airbus terminated on four days’ notice a contract that had begun less than a month earlier simply because it suited their business interest. This field is Verdict-only and does not affect the CEST result.

Are you working for multiple clients simultaneously, or have you actively marketed your services to others in the past 12 months?

Yes — I have or actively seek multiple clientsCEST does not assess this

Paragraph 27: MBF "had a history of contracting out Mr Fitzpatrick’s services ... to a number of different clients, including Westland Helicopters, Strachan & Henshaw and Western Design Systems, both before and after the appeal period". Paragraph 65 finds a "repeated need to find new clients for Mr Fitzpatrick’s skills" and that the opportunity for simultaneous other work was available to him. Verdict-only field.

Do you hold professional indemnity or public liability insurance in your own name or through your company?

NoCEST does not assess this

Not established. Clause 11 of the first-level contract required insurance of GED "and the Personnel", and clause 16 of the third-level contract required Morson to carry £5M legal liability cover, so those obligations sat on the agencies. The second-level contract expressly disapplied the professional indemnity requirement. The judgment makes no finding that MBF itself carried cover, so this is encoded false rather than assumed. Verdict-only field.

This case is one of 10 encoded so far. The method, the limits and the full results are on the study page.

Check my own contract