Primary Path Ltd v HMRC (2011) TC01306


Primary Path Limited (“Primary Path”) was incorporated in May 2000 by director and shareholder Mr Phil Winfield and began trading in October 2000. Primary Path Limited was set up to provide software development services to the Pharmaceutical Industry, primarily Oracle Database software development.

Mr Winfield’s expertise is in the design and development of database software and, in particular, interface software which is software that enables two or more different database systems to work together. Mr Winfield has particular specialisation in database software in the medical, pharmaceutical and healthcare sectors.

Between 4th June 2001 – 31st August 2004, Primary Path entered into multiple contracts to provide services to, GlaxoSmithKline (“GSK”), through different agencies.


This appeal concerned two GSK projects, seven months apart, which Primary Path had provided services on.

The initial project was the design and build of an interface software which enabled web-based synchronisation between in-house medical dictionaries and external industry dictionaries. The project also required close liaison between GSK and a US company, Galt Associates. As GSK had no employees with specialist knowledge in this field, they engaged Primary Path to provide the services required, via the recruitment agency, Abraxas Plc (“Abraxas”). Primary Path were engaged to design a document setting out the plan for the design and interface, with little input  provided by GSK.

Whilst providing the services, it was for Mr Winfield to determine how to carry out and manage his work and report progress to GSK. Mr Winfield determined his own hours, although he did work towards the overall project schedule.

In relation to the second project, Primary Path contracted with Spring IT Personnel plc (“Spring”) to provide services to GSK. This project was to develop the Oracle interface for synchronisation with the Oracle database system. The services where less specialised than the previous project. Once Primary Path had completed this second project, it was handed over to other consultants and contractors, as it was the initial stage of a larger project.

Mr Winfield worked with another contractor on a distinct aspect of the project, with very little technical input from the project co-ordinator and the rest of the team.

The right to provide a substitute was never exercised, although Primary Path had exercised its right to provide a substitute on contracts with other clients.

Primary Path had a website and provided services to other clients simultaneously during the period under appeal.  

IR35 Indicators

A substitution clause was present, which was mirrored by upper and lower level contracts. In terms of substitution, it is the right of substitution that is of most importance, not whether substitution has occurred. Judge Sadler suggested that any contract which included a substitution clause is unlikely to be an employment contract.


Mr Winfield’s database integration skills were so specialist that GSK had no employees with the required knowledge in this field, meaning that he could provide the services without the supervision, direction or control of GSK, and he was able to work from home.

It was found that, as Mr Winfield provided his services with minimal involvement from GSK, he was responsible for the delivery of his part of the project and was therefore not controlled by GSK.

Mutuality of Obligation
By Mr Winfield not being required to work set hours, only being paid for the hours he worked and working towards a clear project schedule, this meant that there was a lack of mutuality of obligations between Primary Path and GSK.

Financial Risk
Mr Winfield carried financial risk by being paid at irregular intervals. HMRC claimed that being paid an hourly rate was indicative of an employment relationship; the Judge, however, held that “an hourly rate is, in the present world, a feature of the fee-charging structure of professional service firms.” Mr Winfield also demonstrated financial risk in that payments received by agencies were irregular, varying between one and six weeks per invoice, and he also charged different rates determined by market conditions.

Other Factors

Mr Winfield did not receive any benefits enjoyed by permanent members of staff such as pensions, bonuses, holiday or sick pay.

Mr Winfield was not exclusive to GSK and was able to provide services to other clients simultaneously alongside the services provided to GSK.

Primary Path’s business address was Mr Winfield’s home address, and Mr Winfield had a home office with business facilities and equipment. Primary Path also funded Mr Winfield’s training and membership of professional bodies and had its own website and marketing materials.


In considering the extent and degree of control and applying the facts of this case to the Ready Mixed Concrete case, the Tribunal stated, ‘the level of control or supervision did not go beyond that which one would expect in the hiring of an independent contractor,’. In addition, the ability to propose a substitute was inconsistent with a contract of service.

The Judge concluded that “…we are clear that the picture we have of the relationship between GSK and Mr Winfield is one of an independent and self-employed contractor, and not that of employer and employee.”