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It appears the Special Commissioner, Dr John Avery Jones, did not really consider the 'in business on your own account' issue because he said "in view of my findings in relation to the contract in isolation I do not need to pursue this aspect of the case."
| The complete 10-page judgment of the Lime-IT case is available in text format in the Shout99.com Conference Hall for debate and reference | | Access here |
In fact, the main factors that seem to have formed his opinion were:
- [1] The right of substitution, which "although the right was never exercised it is not a provision which can be described as a sham. It was negotiated specifically at the Appellant's request";
- [2] Lack of any supervision, direction and control;
- [3] Financial risk - as evidenced by invoicing, the 30-day payment terms and some delays in receiving payment;
- [4] Provision of equipment - "an employee does not normally provide a laptop but a self employed person may do so if it makes the work easier to do, regardless of any contractual requirement";
- [5] The fact that Lime-IT paid its own travel costs between (client) Marconi's different locations without being reimbursed as would an employee and that the actual hours worked varied week by week from nothing to well over 37 hours;
- [6] The fact that Marconi contracted for particular projects and that the end date and hours were merely estimates of the time needed to complete those
projects.
He found very little that was indicative of an employment relationship - length of contract being one: "a slight pointer to employment".
Overall, the judgment comes as little surprise to tax experts who had seen summaries of the case as presented by Accountax. The substitution clause alone should have guaranteed victory for Lime IT - but it is useful that the Special Commissioner noted the fact that it had not been exercised in no way meant it was a sham.
It is also interesting that the Special Commissioner has placed considerable emphasis on practical issues, for example:
[a] the variation in actual hours worked, - "the variation in hours actually worked is more indicative of self-employment";
[b] the fact that Lime-IT had to invoice for its fees and only received payment in 30 days and sometimes suffered delays in payment ("I assume that Marconi did not keep its employees waiting for their salary" and had to press for payment.
[c] the provision of her own laptop;
[d] the fact that the contract has an estimated date for completion: "this would be an unusual feature of an employment contract and is a pointer to self-employment."
It is also interesting that the Special Commissioner has highlighted the difficulty of applying IR35.
He notes: "The case law test of whether someone has a contract of service is difficult. It is even more difficult to apply the case law test to a hypothetical contract."
He also made several references to the fact that there was no evidence from Marconi itself as the reality of the relationship and noted that: "In future cases on this legislation ... the Special Commissioners will wish to explore at a preliminary hearing whether it is possible to obtain evidence from the client."
Overall this is a great result that validates much of the guidance Shout99.com, and others, have given to freelancers as to the key attributes required to beat IR35.
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The Editor
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