S,D and/or C = Fail

[darrylmg]

Supervision = Project Manager.
Direction = Strategy = Technical/Solution Architect.
Control = Security and Audit Team.

Oh dear. I'll get me coat.

Without any clear definition, we're left with "the man on the street".
What do we think most people think those terms equate to?
Are they really suitable for any clear form of legislation?

[LisaContractorUmbrella]

As you say, without guidance from HMRC, no-one is really sure where this will go. The trouble is, they are using a single element from the standard tests for determining employment status and it's pretty much been agreed, up until now, that this is a bad idea. There is no real legal precedent for lawyers to hang their hat on so I would expect no real progress on this until the Autumn statement - at that point we should know what we're up against.

[jamesbrown]

I think this offers a balanced perspective. I don't think SDC is the main issue here or even a wholly negative change. Rather, it's the risk of the client as gatekeeper of whatever tests are implemented, without an incentive to have a professional review and determination on that basis (versus a blanket inside determination).

[LisaContractorUmbrella]

I think this offers a balanced perspective. I don't think SDC is the main issue here or even a wholly negative change. Rather, it's the risk of the client as gatekeeper of whatever tests are implemented, without an incentive to have a professional review and determination on that basis (versus a blanket inside determination).

It is a good article and very balanced but what it doesn't address is the 'right thereof' at the end of the SDC label - how can a contractor protect themselves against something that could be exercised at any point during the contract at the whim of the client and how many clients will relinquish the 'right' of SDC?

[jamesbrown]

It is a good article and very balanced but what it doesn't address is the 'right thereof' at the end of the SDC label - how can a contractor protect themselves against something that could be exercised at any point during the contract at the whim of the client and how many clients will relinquish the 'right' of SDC?

The reason is that the right to control has always been the test of employment status. The only thing that is (potentially) changing about this is the upfront wording to make it explicit. As things currently stand, there is no requirement for control to be shown in practice. It is only necessary to demonstrate that there is a right to impose that sufficient degree of control. See, for example, White and Todd vs. Troutbeck SA. This was also addressed by the judge in HMRC vs. Talentcore. The case law establishes clearly that the right to a sufficient degree of control is what matters. It is not necessary to demonstrate control in practice.

[LisaContractorUmbrella]

The reason is that the right to control has always been the test of employment status. The only thing that is (potentially) changing about this is the upfront wording to make it explicit. As things currently stand, there is no requirement for control to be shown in practice. It is only necessary to demonstrate that there is a right to impose that sufficient degree of control. See, for example, White and Todd vs. Troutbeck SA. This was also addressed by the judge in HMRC vs. Talentcore. The case law establishes clearly that the right to a sufficient degree of control is what matters. It is not necessary to demonstrate control in practice.

But isn't that kind of the point - how can a contractor guard against something which exists in potentia? The Talencore case found that the worker was not an employee as they had the right to substitute - doesn't that lead you to think that Judges don't consider SDC to be that important when the other employment tests are taken into account and maybe why HMRC are relying on it?

[jamesbrown]

But isn't that kind of the point - how can a contractor guard against something which exists in potentia? The Talencore case found that the worker was not an employee as they had the right to substitute - doesn't that lead you to think that Judges don't consider SDC to be that important when the other employment tests are taken into account and maybe why HMRC are relying on it?

No, I concur with the assessment in the link I posted. Specifically, these parts:

Once you are in the realms of engaging experts or highly skilled professionals, then it should not be necessary to stipulate how work is done. Yes, provide the contractor with specifications and guidelines but then leave it to the expert to decide how they go about achieving what end the client wants.

Vessey stresses that genuine contractors are unlikely to fail the SDC test, particularly as recent Tax Tribunal rulings have strengthened some of the interpretation and not in the taxman’s favour: “The control test has been amplified within the SDC framework, and HMRC has its own view on interpretation.

“However, control has been determined and shared by case law, either in an employment or tax context – you only have to look at what the tribunal judges said in the IR35 cases such as Marlen, Primary Path and ECR Consulting. The lack of control over how the contractor did their work was key. HMRC cannot simply decide to change or ignore these rulings, although Tax Tribunal decisions do not normally set binding legal precedence.”

The point is that nothing will change w/r to how the control test (or the SDC portion of it) will apply. So the argument about the "right of" is moot. This is the test of employment status right now. In that sense, HRMC are simply taking a test that is established in case law, not corrupting it. You may disagree with the assessment in the article, copied above, but this isn't about the "right of" anything, it's about the importance of control as a test of employment status. So let's stop talking about the "right of" as being a game changer somehow. It isn't. In fact, it isn't a change at all.

[LisaContractorUmbrella]

No, I concur with the assessment in the link I posted. Specifically, these parts:





The point is that nothing will change w/r to how the control test (or the SDC portion of it) will apply. So the argument about the "right of" is moot. This is the test of employment status right now. In that sense, HRMC are simply taking a test that is established in case law, not corrupting it. You may disagree with the assessment in the article, copied above, but this isn't about the "right of" anything, it's about the importance of control as a test of employment status. So let's stop talking about the "right of" as being a game changer somehow. It isn't. In fact, it isn't a change at all.

Can you direct me to the case where SDC was the sole determinant?

[jamesbrown]

Can you direct me to the case where SDC was the sole determinant?

Can you direct me to the case where the application of control, and not the right thereof, was the determinant? I quote from White and Todd, above.

The ET erred in law. The true question for the ET was whether the Respondent retained a sufficient right of control, not whether it exercised day to day control.

I don't see much point in proceeding to talk about control as a test unless you're able to accept that the test has always been about the right thereof. You clearly disagree with the article, and I'd like to understand why, and whether your argument has any merit. I think it's critically important that we do not accentuate the FUD here about SDC, as that is the precisely the game that HMRC are trying to play. Your first criticism of the article was about the right thereof. Do you accept that it has always been about that?

[LisaContractorUmbrella]

Can you direct me to the case where the application of control, and not the right thereof, was the determinant? I quote from White and Todd, above.



I don't see much point in proceeding to talk about control as a test unless you're able to accept that the test has always been about the right thereof. You clearly disagree with the article, and I'd like to understand why, and whether your argument has any merit. I think it's critically important that we do not accentuate the FUD here about SDC, as that is the precisely the game that HMRC are trying to play. Your first criticism of the article was about the right thereof. Do you accept that it has always been about that?

I do accept that the right thereof has always been part of the SDC element of the accepted employment status test - what I am saying is that the application of ONLY SDC and the right of means that a contractor cannot protect themselves from the legislation changes as the right thereof within SDC is something which exists in potentia. In practical terms - say a contractor works on site for 5 months doing his own thing in his own way - HMRC come along and ask the client 'is that the reality of the situation?' they'd say yes; what would they say if the question was 'presumably if the work wasn't done in the way that you wanted it to be you would have stepped in and given guidance?' - they'd say yes and there's your "right of".

Of course a Judge will look at the case in the round but if there is debt transfer liability and end client will be likely to take the path of least resistance and claim that they do have the right of SDC especially as there is no legal precedent for status being determined using only one single factor. Legal departments will look at cases like Talentcore and see that status was determined on ROS and not SDC, they'll look back at Ready Mixed Concrete and the THREE conditions that have historically been used to decide whether or not someone is working under a contract of service.