Summary:
A case, supported by the PCG, under the IR35-related
National Insurance provisions; the contractor won, income from the contract
in question was held to be outside the scope of these provisions.
Court:
Special Commissioners
Text:
The question was whether or not the arrangements under which
Lime IT Ltd’s services were provided to the Client Marconi through an agency
ERS fell within the IR35-related NI provisions.
The contract was for specified services, with an estimated duration of a
year, paid by the hour.
HELD:
These are
the points the Commissioner weighted at the end of his judgment (and which it
appears he considered the most significant:
Pointers
towards self-employment:
·
Contract
for particular projects.
·
The end-date and the number of hours were both
estimates of the time needed to complete those projects.
·
Miss Fernley did not work a regular pattern of hours;
the hours were dictated by the requirements of the work.
·
The Appellant could not be required to do work outside
the specification.
·
The Appellant purchased a lap-top with a particular
specification specially for use in the job, although
there was no obligation on them to do so.
·
The payment terms were 30 days after invoice and they
suffered delays in being paid in the way that businesses do.
·
There was a right for the Appellant to substitute
another supplier.
·
Miss Fernley did not work alongside any other Marconi
employees as part and parcel of the Marconi organisation.
·
During the Marconi contract the Appellant operated as
a normal small business with its own office working for four other clients.
The pointers
towards employment:
·
contract provides for a fixed number of hours weekly at an
hourly rate for a one year contract. …The reality of the hours worked is very
different from the contract, demonstrating the necessity of looking beyond the
terms of the contract.
·
The element of financial risk is low when payment is
made on this basis, but the risk of delay in payment and bad debts is there.
·
The Marconi purchase order refers to Miss Fernley
doing the work personally but this is explained by the fact that the hourly
rate was fixed with her expertise in mind, and in my view is not contrary to
the right of substitution.
‘…looking at
all the factors there is very little to suggest an employment relationship. 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.
‘In my view on the hypothesis that
Miss Fernley 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.’
Comment
We
offer our congratulations to David Smith of Accountax
for his success in presenting this case on behalf of Lime IT Ltd.
The
fact that the decision may come as no surprise, on seeing the facts, should not
blinker us to the fact that this case has clearly been a worry to the Appellant
for some years – and anyone who has ever handled litigation will know from
bitter experience that no case is ever certain in its end result, however
strong it might appear. There is always
an element of risk.
The
case itself breaks no new legal ground, but it nevertheless offers many interesting
insights into the thinking of the Revenue, and raises a variety of points that
may be taken advantage of by Contractors seeking to organize their affairs so
as to be quite legitimately outside IR35.
Full
text (when available) on
request by email.
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