ANSELL
COMPUTER SERVICES LTD v DAVID RICHARDSON (HMIT) (SpC 425) (2004)
Sp Comm (G Aaronson QC) 29/7/2004
TAX
CONTRACTORS : CONTRACTS FOR SERVICES : EMPLOYMENT
STATUS : MUTUALITY : NATIONAL INSURANCE CONTRIBUTIONS : CONTRACT FOR SERVICES :
LIABILITY OF SERVICE COMPANY FOR NI : IR35 LEGISLATION : HYPOTHETICAL CONTRACTS
: MUTUALITY OF OBLIGATIONS : reg.6 SOCIAL SECURITY CONTRIBUTIONS
(INTERMEDIARIES) REGULATIONS 2000
The
arrangements between a worker, supplied by a service company providing services
to client companies through an intermediary, and the client, had they taken the
form of a direct contract between the worker and the client, would have been
one for the provision of services and not one of employment, therefore the
service company was not liable for national insurance contributions in respect
of the payments made by the client for work performed by the worker under the
Social Security Contributions (Intermediaries) Regulations 2000 reg.6(1)(c).
The appellant (X) appealed against a decision on
its liability to national insurance under the
Social Security Contributions (Intermediaries) Regulations 2000
reg.6(1)(c)
.
X entered
into a contract with a company C under which C would find an 'end-user' for the
services supplied by X.
X agreed to
provide the services of Y, its director to two clients, Z for the purpose of carrying
out work of a particular nature, for an expected maximum number of hours, and C
agreed to pay the agreed hourly rate to X.
The contract
was expressed to be for an unlimited period until terminated by breach or
consent.
It also
provided that, if appropriate, X would offer a suitably qualified substitute to
continue the work for Z.
The potential
liability for national insurance contributions arose from what is commonly
referred to as the IR 35 legislation.
The relevant
question was whether the circumstances of the arrangements between X and Z were
such that, had they taken the form of a direct contract between Y and Z, that
contract would have been one for the provision of services or alternatively a
contract of employment.
If the former,
the IR35 legislation would not apply while if the latter X would have been
liable for national insurance contributions in respect of the payments made by
Z for the work performed by Y.
X's case was
that Y could not be regarded as an employee because he was not obliged to work
any particular number of hours in any given day or week; he could turn up when
he liked and could take time off at his own choosing without seeking
permission; he was treated differently by Z from its employees in that he did
not have access to benefits such as sick pay a company car or to the employee
social club; there had been no mutuality of obligations required for the existence
of a contract of employment.
HELD: The significant factors were the
absence of any obligation on Z to keep Y in work throughout the period of his
engagements; the absence of any obligation on Y to put in a particular amount
of work; Y's ability to take time off at his own choosing without seeking
permission; the ability to withdraw and suggest a substitute individual; the
various other practical matters which differentiated contractors from
employees; and the absence of mutuality of obligations in the fact that Z
believed that they could have terminated Y's activities at virtually no notice,
all of which led to the conclusion that Y would not have been an employee in
the hypothetical contract which the IR35 legislation required to be
constructed,
Montgomery v Johnson
Underwood Ltd (2001) EWCA Civ 318, (2001) ICR 819
applied.
Accordingly,
the circumstances were not those described in reg.6(1)(c) and X was not liable
for national insurance contributions in respect of the payments made by Z for
the work performed by Y.
Appeals allowed.
Counsel:
For
the appellant: Non-counsel representative
For the respondents:
Non-counsel representative
Source: Lawtel http://www.lawtel.co.uk
, copyright acknowledged.