Equipment
The issue
The issues here would appear to be whether there is anything either in the
contract, or in the actual relationship between Individual and Client, in
relation to this factor which
·
helps towards a decision on whether that
relationship, had it been direct and without a company in between, would have
been an employment contract - a contract of service - or a contract for
services, or
·
would be inherently inconsistent with a
contract of employment.
Legal issues, and the Revenue Guidelines
Guidelines:
Provision of equipment - A
self-employed contractor generally provides whatever equipment is needed to do
the job (though in many trades, such as carpentry, it is common for employees,
as well as self-employed workers, to provide their own hand tools). The
provision of significant equipment (and/or materials) which are fundamental to
the engagement is of particular importance. For example, where an IT consultant
is engaged to undertake a specific piece of work and must work exclusively at
home using the worker’s own computer equipment that will be a strong pointer to
self-employment. But where a worker is provided with office space and computer
equipment that points to employment. The fact that a worker might occasionally
choose to do some of the work at home using his or her own computer does not
change that (many employees do just that). (Ready Mixed Concrete (South East)
Ltd v Minister of Pensions and National Insurance).
The following paragraphs are extracted from the Employment Status Manual,
sections ESM1061-ESM1062:
If the engager provides any necessary equipment this fact
will point towards the existence of a contract of employment. A self-employed
contractor generally provides his/her own equipment.
This rule of thumb is subject to exceptions. It is
customary in many occupations - for example tradesmen such as carpenters - for
the worker to provide hand tools, whether employed or self-employed. It is also
commonplace for employees to use their own cars for the purpose of their
employment. Hence little significance can be attached to the provision of small
tools where it is customary for them to be provided. And is the provision of
equipment necessary if the worker is "labour only"?
Provision of equipment, which is fundamental to the
service provided and sufficiently important to affect the substance of the
contract, is of most significance.
For example, the fact that drivers provided their own
lorries was a major factor in Ready Mixed Concrete (South East) Ltd v The
Minister of Pensions and National Insurance (1 968) 2QB497. The Court
decided that the contracts with the company were contracts of carriage rather
than contracts of employment. In R W Proffitt Ltd v Secretary of State for
Social Security, television salesmen were found to be employed and one
important factor in this decision was that they were supplied with cars by the
employer.
But even here this factor may not be decisive on its own -
particularly where it points towards employment. In Hall v Lorimer (66TC349)
a vision mixer was found to be self- employed when the terms, conditions and
facts surrounding his engagements were considered as a whole. This was despite
the fact that the substantial and expensive equipment needed was provided by his
engagers. Mummery J, in the High Court, considered that the provision of
equipment by Lorimer's engagers undoubtedly pointed towards the existence of
employment but this was not sufficient, by itself, to outweigh other pointers
towards self-employment that were present in that particular case.
In relation to that last sentence, it has to be said that whilst Mummery J
did make this statement, his decision in the case was appealed against by the
Revenue, and that particular statement was not approved in the
Court of Appeal - who in fact regarded it as irrelevant in the circumstances of
this case that Lorimer provided no equipment. Hall v Lorimer was the case where
the Revenue
·
lost before the Special Commissioner;
·
appealed to the High Court, and lost; and
·
appealed again to the Court of Appeal, and
again lost (it appears they lacked the stomach to take the case to the House of
Lords!).
It may be important to maintain a clear distinction between:
·
equipment, in the form of tools which are used
to do the job - the washing machine repairman's spanner; and
·
equipment which is the very 'object' of the
services themselves - the washing machine itself
and also between
·
equipment in the form of tools belonging to the
Client which is used by the Contractor purely because it is readily available
and convenient to both parties for it to be used, even though the Contractor
possesses and could use his own such tools; and
·
equipment in the form of tools belonging to the
Client which is expressly acquired by the Client in order to be made available
for the Contractor to use, because the Contractor does not him / herself possess
such tools, and
·
equipment in the form of tools belonging to the
Client which are so specialised that (1) it is likely to be required from time
to time by the Client for the same purpose, and (2) which if the Contractor were
to acquire it, would be unlikely to be of any future use.
There are cases where provision of equipment has appeared to be an
overriding factor, and has tipped the balance:
·
In Ready Mixed Concrete
,
the provision by Individuals of their own lorries was a major factor in
determining self-employment
·
In R W Proffitt Ltd v Secretary of State for Social Security
,
television salesmen were found to be employed and one important factor in this
decision was that they were supplied with cars by the employer.
In other cases it appears less material; in WHPT Housing Ass Ltd v
Secretary of State 1981 ICR 737
an architect who used his own car but received a car allowance was found to be
self-employed. And in today's world, there are many undisputed employees who
provide and use their own cars.
In the case of a highly skilled specialist, engaged to carry out services
using the Client's own specialised equipment, the case of Hall v Lorimer is
helpful:
"Mr. Lorimer provides no equipment (i.e. he
has no tools) he provides no "work place" or "workshop" where the contract is to
be performed, he provides no capital for the production, he hires no staff for
it. No; he does not. But that is not his
business. He has his office, he exploits his
abilities in the market place, he bears his own financial risk which is greater
than that of one who is an employee, accepting the risk of bad debts and
outstanding invoices and of no or an insufficient number of engagements. He has
the opportunity of profiting from being good at being a vision mixer. According
to his reputation so there will be a demand for his services for which he will
be able to charge accordingly. The more efficient he is at running
the business of providing his services
the greater is his prospect of profit."
In the PCG Judicial Review case, it was said:
The Claimants are inevitably concerned that,
with regard to an assignment by a software specialist at a client's premises, it
would be unlikely that he would bring with him any tools or equipment, which
might be one of the more obvious indicia of self-employment if, for example, he
were a jobbing builder or a plumber. That must be right. However, all the
aspects of the relationship must be considered.
More generally, it would seem reasonable to suggest that:
·
Use of the Client's equipment, where it is not
readily available and has to be acquired specially as a tool for
the Individual to carry out the services is likely to be more consistent with
employment - especially where the Contractor does not him / herself possess such
tools - unless the equipment is so specialised that (1) it is likely to be
required from time to time by the Client for the same purpose, and (2) if the
Contractor were to acquire it, would be unlikely to be of any future use.
·
Use of the Client's equipment, solely because
it is readily available and its use is mutually convenient, is unlikely to be
significant either way - particularly when the Contractor himself also possesses
and could have used his own such tools.
·
Use of the Client's equipment, where it is the
'object' of the services, and its use is a necessary constraint given the nature
of the services, is unlikely to be significant either way
·
Use of the Individual's own equipment, where it
is either (1) customary for undisputed employees performing similar services to
use their own equipment (eg the carpenter's tools), or (2) not of a type
generally used exclusively for business, is readily available, and its use is
mutually convenient, is unlikely to be significant either way.
·
Use of the Individual's own equipment, for the
purposes of that Individual's business, where (1) the equipment has been
specifically acquired for the purposes of the business (and generally shown in
the accounts charged as a business expense), or (2) undisputed employees
performing similar services would be unlikely to provide and use their own
equipment, is generally likely to be more consistent with self-employment
Case law appears to suggest:
·
where major and fundamental equipment is
provided, the engagement is almost certainly self-employment
·
where major but not fundamental equipment is
provided, the engagement is more likely to be self-employment
·
where minor equipment is provided, but
nevertheless over and above what would generally be provided by an employee,
this may be a pointer towards self-employment
·
Where the essence of the business is the
exploitation of specialist skills and not the provision of specialist equipment,
then the fact that the Client may provide the equipment is unlikely to be
significant either way.
·
where the essence of the arrangement is NOT
provision of skilled services and where equipment is required, the fact that
such equipment is provided by the Client may be a pointer towards employment.
Comment
what would the position be likely to be in relation to this factor for a
hypothetical employee?
·
logic and experience suggests that a
hypothetical employee would probably utilise the Client's equipment, and provide
either no equipment of any substance him / herself, save perhaps for (1) a car
(probably claiming mileage other than to and from work); (2) use of his own
computer whilst working from home, if in fact (s)he ever did so.
what would the position be likely to be in relation to this factor for a
hypothetical obviously self-employed person or consultancy (eg Andersens, or by
PWC, or EDI?) Logic and experience suggests that a hypothetical obviously
self-employed person or consultancy would probably
·
also utilise the Client's equipment, where that
is in effect the 'object' of the services, or where the nature of the business
is primarily the provision of specialist skills, or when on the Client's site,
to the extent that it is available and convenient to both parties to do so;
such use cannot reasonably be considered as anything other than neutral; and
·
expect to provide his / her own equipment when
on the Client's site where such equipment is not readily available and is needed
as a tool to carry out the services, or in any event when working from his / her
own premises, or where the Individual has incurred significant legitimate
business expense in acquiring the equipment for precisely that purpose - which
use can reasonably be considered a self=employment pointer.
do the facts here actually provide a helpful pointer towards either view?
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