Contract lawyer (UK) Roger Sinclair Egos Ltd

Length of engagement - Long periods working for one engager may be typical of an employment but are not conclusive. It is still necessary to consider all the terms and conditions of each engagement. Regular working for the same engager may indicate that there is a single and continuing contract of employment (Nethermere (St Neots) Ltd v Gardiner (1984)ICR612). Where an engagement is covered by a series of short contracts, or an initial short contract subsequently extended for a longer period, it is the length of the engagement that is relevant, rather than the length of each contract.[1]

It should be noted the case referred to here concerned relatively unskilled home-workers, and an ongoing relationship which had lasted 'some years'. This may well not be analogous in the case of highly skilled professionals.

The following paragraphs are extracted from the Employment Status Manual, section ESM1011 & 1092: [2]

…it can help to consider in more detail the question of control and of other factors that may be present (for example whether the individual is dependent upon or independent of a particular paymaster for the financial exploitation of his or her talents).

- it may be appropriate to take into account the length of the particular engagement and the number of other persons for whom similar work is performed.

It should be acknowledged that an unusual factor in the Hall v Lorimer case was that Lorimer had had some 590 separate engagements over a period of some 6 years, for in excess of 20 different engagers, and each typically lasting between 1 and 8 days.

However, in Davies v Braithwaite it was said [3]:

"When a person occupies a post resting on a contract, and if then that is employment as opposed to a mere engagement in the course of carrying on a profession, I do not think that is a very difficult term of distinction, though perhaps a little difficult to apply to all cases. But I would go further than that and say that it seems to me that where one finds a method of earning a livelihood which does not consist of the obtaining of a post and staying in it, but consists of a series of engagements and moving from one to the other ‑ and in the case of an actor's or actress's life it certainly involves going from one to the other and not going on playing one part for the rest of his or her life, but in obtaining one engagement, then another, and a whole series of them ‑ then each of those engagements cannot be considered employment, but is a mere engagement in the course of exercising a profession, and every profession and every trade does involve the making of successive engagements and successive contracts and, in one sense of the word, employments.

In this case I think it is quite clear that the respondent must be assessed to income tax under Sch. D, because here she does not make a contract with a producer for a post. She makes a contract with a producer for the next thing that she is going to do, and then another producer, and then a third producer, and at any time she may make a record for a gramophone company or act for a film. I think that whatever she does and whatever contracts she makes are nothing but incidents in the conduct of her professional career."

Thus the principle of a pattern of successive engagements (essentially, the same position as a contractor today) has been recognised as being wholly consistent with no more that 'incidents in the course of (a) professional career', and thus not intrinsically being any form of employment pointer. The successive engagements principle would appear equally applicable to contractors, provided they take care not to fall into the trap of Fall v Hitchen (considered later under 'Personal Factors) of allowing those contracts to amount to 'posts' (perhaps better described today as 'positions').

That said, the Contractor who remains with one client for a succession of different contracts and projects may be running an unnecessary risk - although (s)he may be able to say that doing so represents no more than exercising sound management.

The potential dangers here were reinforced in the PCG Judicial Review case, where it was said:

"There will be some who, even though normally in business on their own account, are deemed, in respect of a particularly long engagement, or one particularly subject to a client's instructions, or one where he is working alongside, or on exactly the same basis as, the clients' own employees, to be subject to IR35." [4]

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 either be engaged indefinitely, or for a shorter fixed term (with or without rights of early termination). Further, if the primary task for which the employee had been engaged were to terminate, one would also expect that the employer would make efforts to relocate the employee within the organisation.

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 be engaged for the anticipated duration of the requirement - in effect, constrained by the nature of the project. Alternatively, engagements for less than the project duration might be made, to reflect client's wish to contain commitment to expenditure. Long engagements, other than where justified by project requirements, would not generally be expected - although repeat engagements from satisfied customers might be.

do the facts here actually provide a helpful pointer towards either view?

If you're another lawyer or an accountant reading these pages, I'd be happy to discuss any points arising with you - particularly if you'd like to debate any points where you disagree with my views - mail me!

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[1] http://www.inlandrevenue.gov.uk/ir35/guidance.htm

[2] http://www.inlandrevenue.gov.uk/manuals/esmmanual/part1000/esm1011.htm

[3] Davies v Braithwaite 1931 2KB 628

[4] R v PCG Ltd 2^nd April 2001

Length of Contract

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