Dawson Hart score a hat trick at the Uckfield Business Awards! We recently celebrated a remarkable evening at the Uckfield Business Awards , held on September 26 th at the East Sussex National Hotel. Organised by Ian Noble of the Uckfield Chamber of...
When deciding whether a worker is employed or self-employed for tax purposes, the principal factors taken into account are mutuality of obligation, the level of control in the relationship and a person's ability to substitute someone else to perform their role. All three came under close analysis in a guideline case.
The case focused on the intermediaries legislation – commonly known as IR35. It concerned a highly skilled project manager whose services were provided to a building society under a series of fixed, short-term contracts. The building society contracted with recruitment agencies which in turn contracted with the man's personal service company.
HM Revenue and Customs (HMRC) took the view that, were the company's role as intermediary left out of account, each hypothetical contract between the man and the building society would have been one of employment. On that basis, the company was assessed for Income Tax and National Insurance Contributions in respect of periods totalling more than two years. The company's challenge to that assessment was subsequently dismissed by the First-tier Tribunal (FTT).
Rejecting the company's appeal against that outcome, the Upper Tribunal (UT) noted that the fact that the building society engaged the man to perform specific projects, and could not require him to carry out any other tasks, was not inconsistent with a contract of employment. There was no error of law in the FTT's conclusion that there was sufficient mutuality of obligation to give rise to such a contract.
Given his specialist expertise and familiarity with the building society's business, his limited contractual right to substitute another worker to take his place would have been difficult to exercise and he had in fact never done so. The dominant feature of the hypothetical contracts was an obligation to provide his services personally.
The UT acknowledged that the building society had no power to move him from one project to another. Although it had a contractual right to dictate where and when he provided his services, his working arrangements were, in practice, more flexible. On the other hand, he was required to strictly comply with the building society's policies and processes in a highly regulated industry. Overall, the building society had sufficient control over him to give rise to a hypothetical employment relationship.