A tax tribunal ruling issued on 4 March 2020 concerned the IR35 rules as they apply to an individual operating through a service company providing services to a client.

Under the IR35 intermediaries legislation the decision as to whether the individual is really employed by the client is determined in terms of a hypothetical contract between the individual providing the services and the recipient of the services, disregarding for this purpose the intermediate service company. The hypothetical contract must take into account the terms of the actual contracts under which the services were provided.

The individual was not entitled to any holiday, sickness, pensions benefits or other benefits in kind . There was no induction or training on commencing a contract except for health and safety. There were no appraisals and no line management responsibilities. The individual was given a contractor pass rather than an employee pass and was required to take out suitable contractor insurance.

The tribunal found that there was a right for the individual to provide a substitute to do the work but the right was qualified. No substitute was proposed at any time by the individual during the relevant period and it would have been difficult for him to offer a substitute that the client company (acting reasonably) would accept.

Although the individual did not in practice keep each day to the standard working hours, and this was not required in practice by the client company, he worked for as long as required without claiming overtime. He decided his own working patterns in practice.

The individual could not be moved from one project to another and at the start of a contract the scope of his work was determined in general terms. The individual was required to work within the client’s policies which set out required processes, reporting obligations and so on. He was also required to obtain approval for his project plan and performance was monitored.

The tribunal concluded that the client company had the right to control where and when the individual worked even thought that right was not exercised. The level of control that the client company exercised over the individual’s work was not inconsistent with that of a highly skilled professional employee. He was taking very little financial risk and did not need to incur great expenses, so his financial exposure was similar to that of a full time employee on a fixed term contract. There was a long standing relationship between the client company and the individual and he did not need an interview or training before beginning any project. The relationship was therefore found to be one of employment and the tribunal dismissed the individual’s appeal.