Ansell IR35 win - why this is great news for the typical contractor

The recent case was supported by the PCG. Dave Smith of Accountax explains why this is an important case for contractors:

The judgement runs to 20 pages. The facts are simple and affect many similar contractors. Mike Ansell was an IT specialist working on defence projects. Although his work was on a project by project basis they tended to get renewed and he had been at Marconi/Bae for some years. Two contracts were under appeal. The first had a relatively weak sub clause which was beefed up a bit in the second. Our arguments centred as usual on the fundamentals of sub, moo and control. Mike had relatively few "in business" factors and didn't have PII for example.

The Special Commissioner sets out the facts from the evidence and even though the agency/end user contract was not available he had no real difficulty in formulating the hypothetical contract.

He gave 5 main reasons for concluding IR35 did not apply:

1. The end user had no obligation to keep Mr Ansell in work throughout the length of the contracts entered into.

2. Mike Ansell had no obligation to put in any particular amount of work per day/week

3. Mike had the ability to take time off at his own choosing without seeking permission.

4. Mike has the ability to "suggest a substitute individual". This ability was accepted as genuine even though "it was very unlikely that the situation would in fact arise".

5. The practical day to day differences between Mike the contractor and permies ie no pension, sick pay etc.

Rather than saying any one of these factors were knock out blows in themselves the Special Commissioner said he "reached the clear conclusion on all the evidence".

I am not surprised to see the reasons 1 and 2 (effectively a lack of MOO) but was particularly pleased to see the importance of 3 and 5 elevated. He took a practical approach and concentrated on the differences between contractors and permies. One should also note that the ability to suggest a sub was not given low priority. It was accepted as genuine even thought he sub clause itself was weak in the Marconi contract.

The Revenue continually say contractors don't get employee benefits because such benefits merely flow from the correct status and are not determinants.

The Special Commissioner effectively disagrees. He says that these factors are all part of the negotiating process that the parties commercially discuss and consider and cannot be simply dismissed. They are important factors if not absolutely conclusive. This is very helpful.

Finally the Special Commissioner accepted that my submissions on MOO "had considerable force". He also said that it was sometimes difficult to see precisely what elements make up MOO. Because he had found in favour of Ansell on the rest of the evidence he did not feel it necessary to explore the question further.

He also dismissed the Revenue's "you do not show the typical 'in business' factors therefore you are caught" argument by saying that the in business test has to be seen in the specific context of the person concerned and someone doing secret work on a defence project would not be expected to act in the same way as typical entrepreneurs. All very helpful.

So? A great result for Mike and other similar Bae/Marconi contractors with a very useful summary of what was regarded as important including elevating freedom to take time off and the contractor/employee differences into very important factors. This decision can only help thousands of contractors.

Dave Smith, Accountax

For CUK's Guide to IR35 click here: Factors Determining Employment Status

Tuesday 3rd August 2004