SDC and IR35

[TheFaQQer]

Or based on HMRC's interpretation of case law.

How would you ever challenge it?

Without knowing the details of what cases are going into the tool, and the mechanism for updating it, I presume the same way that I would challenge any judgement from HMRC that deems me inside IR35.

[jamesbrown]

Will case law be relevant if the ESI tool determines IR35 status? How would you ever challenge it? (Assuming the engager has to run the tool).

They can't have it both ways. They either define an ESI test based on strict deeming criteria, no nonsense, devastation to the contracting industry. Or, they go with the airy-fairy concept of SDC that is benchmarked against case law in the event of a dispute over whether SDC applies. It's one or the other. But if they're going with the latter and having it completed by a client with financial penalties applied, it's effectively the former.

[jamesbrown]

Or based on HMRC's interpretation of case law.

How would you ever challenge it?

Er, legally? Since when has their interpretation of case law mattered (except as a deterrent)?

If the client is making the decision, this is irrelevant of course.

[teapot418]

If the client is making the decision, this is irrelevant of course.

That was my point.

[jamesbrown]

That was my point.

Then how does HMRC's interpretation come into it? You're not going to have a client looking at legal interpretations w/r to specific instances, that's way down in the weeds. They will automatically assume SDC unless you're a seriously in-demand specialist, in which case they will be compelled to look at the facts.

[teapot418]

Then how does HMRC's interpretation come into it? You're not going to have a client looking at legal interpretations w/r to specific instances, that's way down in the weeds. They will automatically assume SDC unless you're a seriously in-demand specialist, in which case they will be compelled to look at the facts.

Sorry - I wasn't very clear.


HMRC's interpretation of existing case law will drive the questions and results offered by the ESI tool.

I'm picturing a scenario where clients will be obliged to use the ESI tool to determine the IR35 status of their contractors (perhaps this is where the rumoured 1 month leeway comes in?)

I can't see how a contractor would successfully challenge an 'inside' decision, but I'd like to be wrong.

I think we're saying the same thing!

[jamesbrown]

Sorry - I wasn't very clear.


HMRC's interpretation of existing case law will drive the questions and results offered by the ESI tool.

I'm picturing a scenario where clients will be obliged to use the ESI tool to determine the IR35 status of their contractors (perhaps this is where the rumoured 1 month leeway comes in?)

I can't see how a contractor would successfully challenge an 'inside' decision, but I'd like to be wrong.

I think we're saying the same thing!

We're saying similar things. We're saying the same thing w/r to a client using the ESI tool, because it's not a question of status, it's a question of the client's risk tolerance, and I can't see the basis for challenging the client on this (and obviously it's moot in terms of challenging HMRC, because it will be an inside determination). Where we differ is that, if HMRC puts in place an SDC status test that is completed by the contractor and they challenge the outcome subsequently, what matters is how a tribunal judge interprets SDC, not what HMRC says about it. It all comes down to how they implement this. To begin with, it's likely to be voluntary and completed by the contractor, at least until the employment status review has made recommendations.

[LisaContractorUmbrella]

HMRC have cited a number of cases in previous guidance on SDC:

Ready Mixed Concrete v Minister of Pensions and National Insurance (1968). This case is famously quoted when Judges are considering employment status but the case itself was actually to determine whether or not the worker was engaged under a contract of service or a contract of carriage. The worker was required to:

“Carry out all reasonable orders from any competent servant of the company ‘as if he were an employee of the company”

Yet the Judge in the case stated:

“A man does not cease to run a business on his own account because he agrees to run it efficiently or to accept another’s superintendence”

In this case the contract was found to be one of carriage and not employment.

They also quote Talentcore Ltd v HMRC which concerned consultants working on a cosmetics counter; HMRC determined that they were employees for tax purposes. The case went to appeal but both Judges decided that although there was a right of SDC the workers had an unfettered right of substitution, this meant that they did not have to provide personal service and therefore they were deemed not to be employees.

Two other cases are mentioned - one is Autoclenz v Belcher and the other is Serpol v HMRC. In the first case the workers valeted cars and were employed under Contracts of Employment and in the second the workers were former police officers who were engaged by Bedfordshire Police Force to work as disclosure officers, exhibit officers and SOCO's - some were found to be employees and some were not.

HMRC also consider SDC in their Employment Status Manuals:

The two cases cited by HMRC in ESM2005 on the right of SDC as to the manner in which services are provided are not available for scrutiny, one – Staples v Secretary of State for Social services is unreported!

HMRC refer to Market Investigations v Minister of Social Security in ESM2056 – Guide to Determining Status: control over how the work is done and claim that “great importance was attached to the control the company could exercise over the way the interviewer carried out her assignment. However, ESM7040 quotes the Judge in the case (Cooke J) who said:

“The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor”

The case is not available to reference through the usual channels either.

I'd like to say HTH but, the fact is, it really doesn't

[northernladuk]

I bet you are a blast at a party.....

[LisaContractorUmbrella]

I bet you are a blast at a party.....

You have no idea