Length of Contract – Massive IR35 court win for IT Contractors

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Length of Contract
Length of Contract

Length of Contract

Here’s news hot off the press. Length of contract does not now imply IR35. It destroys the Mutuality of Obligation case too.

Court of Appeal – James v Greenwich Council

Not an Employee

In a long awaited and significant judgement released today by the Court of Appeal, the eminent judges have affirmed the case that the particular agency worker is NOT the employee of the end client, Greenwich Council.

The case involved a Ms Merana James. She claimed unfair dismissal because her agency sent another temp worker to Greenwich Council when she took time off from the work.

Upon her return after a month‘s absence Ms James found another temporary worker supplied by her agency carrying out the role.

She then claimed that she had worked for 3 years with the client. She claimed she was an implied employee and entitled to the entitlements of a permanent worker.

No Employment Status Caused by Length of Time

The courts found that the length of time she had worked for the client had not provided her with employment status.

They stated the governing contract she had was a temporary agency workers agreement with the agency. This didn’t supplanted an implied contract of employment between her and the end client.

Of particular significance is that the length of 3 years had not created an employment relationship.

Many clients and contractors fear that after a year’s work, an employment relationship can automatically exist between the two. Then IR35 becomes applicable.

No Mutuality of Obligation

This ruling has certainly quashed that. Equally importantly, the initial employment tribunal judgment held that there was a lack of Mutuality Of Obligation (MOO) between the client and worker in the agency relationship. This then prevents the establishing of an employment relationship.

So, this judgment will now be persuasive to future employment status cases, which includes IR35.

In conclusion, for IR35 purposes, where there is an agency relationship in place, and where the client does not guarantee work throughout the period of contract, nor pay when work is not carried out, it is now highly unlikely that IR35 taxes can be applied.

That puts the kibosh on Length of contract being a decisive factor of putting a contractor inside IR35.

Contact Details

This article was supplied to us by David Greene of top Accountants, Nasa Consulting.

[email protected]
DirectLine: 0117 904 7752
Company : 0117 904 7755

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