What are the IR35 tests for employment status?

Type of income Statutory provisions Guidance Income of agency workers Sections 44 to 47 ITEPA 2003 Employment Status Manual Workers providing services through intermediaries to small clients (the “IR35” provisions) Sections 48 to 61 ITEPA 2003 Employment Status Manual Managed Service Companies Sections 61A to 61J ITEPA 2003 Employment Status Manual Workers’ services provided through intermediaries to public authorities or medium or large clients (the “IR35” provisions) Sections 61K to 61X ITEPA

In deciding whether a person is in business on his own account or working under the control of and as part of the business of another, a variety of factors are relevant. Cooke J said in Market Investigations (see ESM7040) No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining’ [whether there is a contract of employment] ‘nor can strict rules be laid down as to the relative weight which the various considerations

The intermediaries legislation, commonly referred to as IR35, is anti-avoidance legislation designed to stop individuals gaining a tax and National Insurance advantage by disguising their employment status. In an IR35 case, an individual provides their services to a client via an intermediary. The intermediary is usually a company but can also be a partnership or individual. The intermediary earns all, or most, of its income from supplying the individual’s services in circumstances that would be

s does not necessarily mean that there cannot be employment although the greater the level of control there is, the stronger the pointer towards employment. You must also bear in mind that the right of control is only one factor to consider and must be considered in context. The right of an engager to exert control over a worker is a strong pointer towards employment. When investigating the status of a worker you need to establish whether the engager has the right to control the worker. The fact

d. There was no obligation on Mr Lee to continue to provide his services once the project was completed even if the end date of the contract had not been reached. Substitution – the FTT erred in concluding that, even though the hypothetical contracts would have contained a substitution clause, the right of substitution “might be seen as almost theoretical” as there was no (or no sufficient) evidence to support this finding. Part and parcel – the FTT failed to provide adequate reasons for its f

But where there is no global contact, it is necessary to consider whether the minimum mutuality of obligation exists for each separate (shorter) engagement.### Right of substitution The substitution clause in the agreement provided that Mr S was the one expected to provide the services but Synaptek “may with the consent of the Client substitute alternative personnel…”. Mr Justice Hart confirmed the Revenue view of such clauses in saying, “The effect of the contract is that, unless and until agre

through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same

In the High Court case of Dragonfly Consultancy Ltd v HMRC - see ESM7290, the appellant contended the Special Commissioner should have taken account of the concept of intermediate ‘worker’ status. Henderson J confirmed the general law of employment does not recognise a third intermediate category between employment and self-employment; therefore there was no reason why the Special Commissioner should have considered any other category. In the context of IR35 the only distinction to be made is wh

All the status factors ESM0500 need to be considered, but there are certain key elements that have proven particularly relevant in deciding status: Mutuality of Obligation ESM4133 Personal Service ESM4134 Control ESM4135 Other indicators inconsistent with employment for tax (in particular, where the individual is in business on their own account) ESM4136

The stage three Ready Mixed Concrete test for employment status was not before the Supreme Court in the PGMOL case, but the judges in that case endorsed the approach taken by the Court of Appeal in The Commissioners for Her Majesty’s Revenue and Customs v Atholl House Productions Ltd [2022] EWCA Civ 501 (AHPL) case which is summarised as follows: Mutuality of obligation and a 'right of control' are necessary pre-conditions of employment. The terms of the contract then need to be considered to s

This section and the sections up to and including ESM8560 deal with consideration of the evidence obtained in an IR35 case and apply both in a customer service and a compliance context. An essential condition that has to be satisfied before the legislation will apply is that the worker’s services are provided in circumstances such that he or she would have been for income tax purposes an employee of (for NICs, employed in employed earner’s employment by) the client if the worker had contracted d

Case law has established that there has to be an “irreducible minimum of mutual obligation” for there to be a contract of service and hence employment (see ESM0543). In the context of IR35 it is a notional contract that is being considered and consequently you must be able to point to an irreducible minimum which would have existed. In the Judicial Review of the IR35 legislation the judge stated: “Of course there is in fact no contract between the client and the service contractor, and thus no o

ned the years in dispute. The CoA set aside the UT decision and the case was eventually remitted back to the FTT. The CoA gave authoritative new guidance on the following points in its judgment. That Ready Mixed Concrete and Hall v Lorimer are not two different tests leading to different conclusions, both are essentially the same test. Where mutuality of obligation and a ‘right of control’ are necessary pre-conditions to meet the irreducible minimum required for employment, then the third stag