This is one of the main pointers used in IR35 disputes regarding employment and self-employment.
One important case is McMenamin v. Diggles. Mr. Diggles was the senior clerk of a leading set of barristers' chambers in Manchester. Up to 1985, Diggles was employed as a senior clerk and taxed as an employee. After 1985, his contract was changed and he would now work for each member of the chambers. The new arrangements meant that for a fixed percentage of fees from each member, Diggles would provide a "Full Clerking Service" at his own expense. By the agreement Diggles could either undertake the work himself or provide a suitably qualified alternative.
The terms of the agreement meant that a full-time Head Clerk of no less than 10 years experience would be provided and also a Junior Clerk(s) to help to deliver the services.
In this Tax case the Control tests were used, to determine whether Diggles was still an employee. It was agreed that Diggles could provide the services as he saw fit, there were no fixed hours and he did not take direct orders from the members. Although Diggles had to abide by a code of conduct (because he was supplying services to barristers), it was accepted he was not controlled by it.
It was further argued that Diggles was operating a business in his own account and had registered for Value Added Tax (VAT) from 1985. The Revenue argued that Diggles was still an employee as he was operating in a master/servant relationship with the barristers and the Junior Clerks were employed on behalf of the Chambers. The Revenue stated that Diggles was an office holder under Schedule E and control was an important part of his job. This was rejected and Diggles was accepted as self-employed.
By Ray McMahon, a former tax inspector.
Editor's Note: Further Reading -