Most IR35 disputes never make it past the First-tier Tribunal.
Only a handful of cases make it to the Upper Tribunal. Fewer still go on to the Court of Appeal. And only the most exceptional disputes end up before the Supreme Court.
If you follow IR35 case law, you’ll regularly see references to different levels of the system: FTT, UT, CA and occasionally SC.
In this guide, we explore how an IR35 dispute progresses through the stages and what is required for a case to move from one level to the next.
1. HMRC enquiry
IR35 tax litigation normally begins with an HMRC compliance check or enquiry into the relevant tax position.
Under the original Chapter 8 IR35 rules, this will generally concern the contractor’s intermediary. Under the Chapter 10 off-payroll rules, HMRC may instead investigate the organisation responsible for operating PAYE.
Under the original Chapter 8 IR35 rules, HMRC may open an enquiry into a company’s Corporation Tax return or PAYE position.
During the course of the enquiry, HMRC will request contracts, emails, witness statements, and details of working practices. The investigation stage can last for years in some cases.
If HMRC determines that IR35 applies to an engagement, it issues closure notices, determinations or assessments.
At that point, the company can appeal the decision, and HMRC can review the determination.
For an overview of how that stage works in practice, see An HMRC IR35 investigation.
2. First-tier Tribunal (FTT)
The First-tier Tribunal is the fact-finding tribunal where a judge decides the outcome.
This is where witnesses give evidence and can be cross-examined.
The tribunal examines the terms of the contract and then applies the established employment status tests: control, personal service, mutuality of obligation and the wider picture.
This process has been established by long-standing authorities, including Ready Mixed Concrete (1968), Market Investigations (1969), and Hall v Lorimer (1994).
FTT decisions do not create binding precedent for other tribunals. The FTT applies the legislation and relevant binding authorities to the facts before it.
If either side considers that the tribunal has made an error in law, they can apply for permission to appeal.
Permission to appeal is required. An application is normally made first to the FTT; if permission is refused, an application can generally be made to the Upper Tribunal.
3. Upper Tribunal (UT)
The Upper Tribunal does not rehear the evidence or revisit every factual finding made by the FTT. Its remit is narrower.
The Upper Tribunal’s function is to decide whether the First-tier Tribunal made an error of law.
An error of law can include:
- Applying the wrong legal test
- Failing to construct the hypothetical contract correctly
- Misinterpreting binding authority
- Failing to make the necessary findings of fact
Recent IR35 cases that reached the Upper Tribunal stage include:
In RALC, the Upper Tribunal set aside the FTT’s decision because the hypothetical contract had not been properly identified.
In Basic Broadcasting Ltd, the Upper Tribunal found that the tribunal had adopted the wrong analytical sequence when assessing the director’s employment status.
The Upper Tribunal can:
- Dismiss the appeal, meaning the FTT decision stands
- Set aside the decision and remake it itself
- Set aside the decision and remit the case to the FTT for a fresh hearing
Where a case is remitted, it goes back to the First-tier Tribunal to be heard again.
4. Court of Appeal (CA)
Appeals from the Upper Tribunal on a point of law may proceed, with permission, to the Court of Appeal in England and Wales. The equivalent route is to the Court of Session in Scotland or the Court of Appeal in Northern Ireland.
This is where major IR35 framework decisions have been made.
For example:
The Court of Appeal clarifies legal principles. It does not normally re-evaluate every factual detail unless something has gone seriously wrong.
Its decisions bind both the Upper Tribunal and the First-tier Tribunal.
5. Supreme Court (SC)
The final level a case can reach is the Supreme Court.
No IR35 case involving a personal service company has yet produced a Supreme Court judgment, although several important employment status and tax-status cases have reached the Court.
Some examples include:
- Autoclenz v Belcher (2011)
- Pimlico Plumbers Ltd v Smith (2018)
- HMRC v Professional Game Match Officials Ltd (2024)
The Supreme Court settles points of law. Its decisions are binding on all lower courts and tribunals.
The hierarchy in practice
An IR35 status case will usually move through the system in the following way:
HMRC enquiry → First-tier Tribunal → Upper Tribunal → Court of Appeal → Supreme Court
Most cases stop at the First-tier Tribunal.
A smaller number are appealed to the Upper Tribunal.
Cases reaching the higher courts will normally involve an arguable error of law and, at the higher appellate levels, often raise issues of wider legal significance.
This is why cases like Atholl House and PGMOL carry so much weight.
They were decided at a higher level of the judicial hierarchy, so their reasoning binds the tribunals and courts below.
Not every IR35 decision carries the same legal weight. First-tier Tribunal decisions do not create binding precedent. Upper Tribunal decisions are binding on the FTT, while Court of Appeal and Supreme Court judgments bind the courts and tribunals below them.
This is why a higher-court judgment can change how earlier IR35 decisions should be interpreted.