Tilbury Consulting Ltd v Margaret Gittins: Analysis

Dave Smith of Accountax represented Tilbury Consulting Limited. The following initial analysis is provided by Theresa Naylor of Accountax:

Due to the inconsiderate action of the postal workers this decision was delivered to us by fax. Fortunately, the very first page gives the result which gave us the opportunity to read the rest of the judgment as it came through knowing that we had won.

The majority of the nine page judgment is taken up by findings of fact with a mere half a page of conclusion. Mr Oliver had gone into substantial detail about the nature of the work, the relationship between Ford and Compuware in respect of this particular project and even Tilbury Consulting Limited's life history.

Mr Oliver then listed the main facts that were established during the two day hearing including:

  • that it was not a matter of concern to Ford who provided the services, much of the work was done at Ford's premises (although some was done from Tilbury Consulting Limited's premises);
  • Tilbury Consulting Limited had the 'qualified right' to send a substitute but that this had never been exercised;
  • Tilbury Consulting Limited was paid by the hour;
  • Mr Tilbury had a pass which was a different colour to a Ford employee pass and that it did not give him access to the gym;
  • Ford's medical centre is open to everyone on site be they contractors or employees (the fact that Mr Tilbury would have received medical treatment from the Ford medical team had been raised by the Inland Revenue. To this day I do not understand the point that they were making with this but it was found as a fact that this was open to both employed and self employed);
  • That it was not part of the direct manager from Ford's function to tell MR Tilbury how to do the work.

Mr Oliver then provided his conclusion which said that the findings of fact as set out above show that Mr Tilbury would not have been regarded as Ford's employee. He then focused on three areas. The first was that of control and particularly the fact that Ford did not have operational control over the project and that they could not tell Compuware how to do the work. The second was the right of substitution that existed between Compuware and Ford and between Tilbury Consulting Limited and Compuware and thirdly he said that Mr Tilbury was not part of Ford's business or undertaking. These facts, he concluded, were inconsistent with employment.

As this came off the fax machine and I read through quickly for the first time I felt disappointed. In the Lime-IT decision Dr Avery-Jones had gone through individual facts and given his opinion on them but in the current case we seemed to have a simple list of facts and a conclusion without the same in-depth legal analysis.

However as I read it through again I realized that this was, in fact, a very interesting judgment as it seems to come at the problem from an entirely different angle than Lime-IT. Stephen Oliver QC is not concerned with balancing exercises or painting pictures, nor does he even appear to consider the 'in business on own account' aspect. He has simply said here are the facts, if they were to form a hypothetical contract would any of these facts be inconsistent with a contract of employment.

When you look at it from that viewpoint you can understand why his conclusion refers almost exclusively to the lack of control and the right of substitution as nearly everyone, with the exception of the Inland Revenue, has long since accepted that these are factors inconsistent with employment. Stephen Oliver QC does not quote any case law to support this. One cannot help wonder if this is because he feels that he is referring to something which is firmly established law.

My belief is that this is a very useful decision for the following reasons:

1. The Revenue are arguing on many cases, as they did here, that where there is a chain of parties and the 'client' would only accept a substitute from the agency, there is no right of substitution. They have argued this even where there is a right in both the upper and lower contracts. It seems safe to say that this argument was not accepted by the Special Commissioner.

2. The Revenue have argued that Synaptek meant that in IR35 situations where a substitute is not sent the right of substitution is not important and again this argument was not accepted by the Special Commissioner.

3. The Revenue have argued that IR35 means that they start by assuming that the client contracts directly with the worker and then decide what the terms of that contract will be. Stephen Oliver QC has said that one must use 'the facts as they existed during the period' as the basis for the hypothetical contract. This is very important. At one point the Revenue actually said that one started by presuming that Ford employed Mr Tilbury and one then had to decide whether this was under a contract of service. This is a fairly self fulfilling prophecy but this approach would seem to have been knocked on the head.

4. The Revenue concentrated on the similarities between Mr Tilbury and an employee of Ford whereas the Special Commissioner focused on the differences and subsequently found these to be inconsistent with an employment relationship. This is, I feel, the most important part of this case. There is almost always going to be a mountain of similarities and a mere molehill of differences. What we have seen in this case is the appropriate weight being attached to those factors.

So – a worker who has been at the same end user for nine years, who has never sent a substitute and gets paid by the hour has escaped IR35. There is hope for us all.

In conclusion, this decision provides some useful clarification on what have been areas of serious contention. It is also nice that in providing clarification the Special Commissioner has agreed with us. That does rather put the Inland Revenue in a minority of one which as we know is the definition of insanity!
 

Friday 30th April 2004