From the Professional Contractors Group (PCG)
The PCG‘s barrister at the High Court IR35 case says that there are some useful pointers that have come out of the case.
Point of Law Verdict
Although the High Court decision was not a victory for Synaptek, it seems to me that a number of useful points can be derived from it for other cases. But first, it is important to understand that this appeal from the General Commissioners to the High Court was, like all appeals of this kind, limited to being an appeal on points of law only.
The facts, and the weight to be given to the different facts found, is not a matter for the High Court and therefore the General Commissioners‘ decision on the facts was conclusive. (The reason behind this principle is that only the General Commissioners have the benefit of hearing the evidence ‘˜live‘. The legal position for appeals from the Special Commissioners to the High Court is identical.)
Therefore, the fact that Synaptek has been unsuccessful in this case, does not mean that other similar cases have to be decided the same way: Synaptek‘s case does not constitute ‘˜binding authority‘ for the weight to be given, by the Commissioners in other cases, to the various factors indicating employed or self-employed status. It is of course authority for the underlying legal principles.
It could be said that this means there is continuing uncertainty. But of course each case has its own particular facts, and therefore it remains open, in each case argued with the inspector or before the Commissioners, to maintain that the balance comes down on the self-employed side.
The ‘˜mutuality of obligation‘ factor would seem to be definitive (see below); other factors, in approximate order of importance (most important first) would be:
(1) to what extent is the individual under the control of the client;
(2) is there an unfettered right of substitution;
(3) does the individual have other clients and can it be said that he is generally in business on his own account (notionally: of course it will in fact be the company);
(4) to what extent does the individual provide his own equipment and/or work from home;
(5) to what extent is the individual integrated with the client‘s own workforce;
(6) is it a full time post, with a standard working week of (for example) 35 hours or 38 hours;
(7) the duration of the contract;
(8) to what extent is the company responsible for the individual‘s training, professional development and insurance.
Inland Revenue‘s Thinking
Factors (6), (7), (5) and (1) are the most commonly relied on by the Revenue to indicate that IR35 should apply. The fact that an individual bears some financial risk in that there is a risk of non-payment due, for example, to insolvency of the client or the agency, does not appear to be of significance although if in a particular case there was a greater degree of financial risk than that then it might be significant.
Mutuality of obligation was regarded by the judge during the course of the hearing as particularly significant. In the case of a global contract, that is to say a long-term contract (for example, the 6 month contract entered into by Synaptek in this case), mutuality of obligation means that the ‘˜employer‘ must be obliged to provide work for the worker to do and the worker must do that work, with the implication being that even if the employer sends the worker home one day because there is no work to do, the worker must still be paid.
The Revenue have now accepted that it is a defining feature of employment, in a global contract case. If there is no mutuality of obligation, then it cannot be characterised as a contract of employment and so IR35 cannot apply. This seems likely to be important in future cases.
In Synaptek‘s case, however, there was mutuality of obligation because the client was obliged to allocate work for Mr Stutchbury to do, and there was a four week notice period.
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