LIME-IT LTD v THE COMMISSIONERS OF INLAND REVENUE (2002)

Sp Comm (JF Avery Jones) 17/10/2002

TAX - AGENCY - INSURANCE

The appellant IT company was not liable to pay primary and secondary Class 1 national insurance contributions in respect of earnings by its director for a client under a contract between the appellant and an agent of the client. Had the worker contracted directly with the client, she would not have been employed under a contract of service.

Appeal from the respondent's decision that the appellant ('Lime') was liable to pay primary and secondary Class 1 national insurance contributions in respect of certain earnings by F, the sole shareholder and director of Lime.

Lime was an IT company that, among other things, provided computer support services.

Lime contracted with an agent that provided expert help and assistance to "end-users", to provide support services to an end-user ('Marconi').

It was common ground that: (i) reg.6(1)(a) Social Security Contributions (Intermediaries) Regulations 2000 SI 2000/727 was satisfied as F had personally provided those services; and (ii) reg.6(1)(b) was satisfied as Lime was an intermediary involved in arranging the performance of those services.

On appeal, the issue was whether reg.6(1)(c) was satisfied, that is, whether F would have been regarded as employed under a contract of employment if the arrangements had taken the form of a contract between F and Marconi.



HELD: (1) The pointers against the contract being a contract of service if the contract was between F and Marconi were that:

(a) Marconi contracted for particular projects and the end-date and number of hours were estimates of the time needed for completion of those projects;

(b) F did not work a regular pattern of hours, her hours were dictated by the requirements of the work;

(c) Lime could not be required to work outside the specification;

(d) although it was not obliged to do so, Lime purchased a laptop computer specially for use in the job;

(e) payment terms were 30 days after invoice and Lime suffered delays in payment;

(f) Lime had the right to substitute an alternative supplier;

(g) F did not work alongside any Marconi employees as part of the Marconi organisation; and

(h) during the Marconi contract, Lime operated as a normal small business with its own office working for four other clients.

(2) In essence, Marconi was contracting for a particular IT job from a small business in the way one would expect an IT consultant to be engaged.

On the hypothesis that F had contracted directly with Marconi, she would not have been employed under a contract of service, she would have been in business on her own account.

(3) (Obiter) In future cases on the legislation, Special Commissioners would wish to explore at a preliminary hearing whether it was possible to obtain evidence from the client.

Appeal allowed.


David Smith of Accountax Consulting Ltd for Lime-IT. Barry Williams of London Regional Advocacy Unit for the respondents.

(2003) STC (SCD) 15

Document No. AC0302039

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