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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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As employment agencies, contractors and their advisers continue to grapple with the implementation of IR35, an Employment Appeal Tribunal hearing in London last week delivered a welcome boost to the campaign to prove that independent contractors should not be deemed to be employees of the end client. The Appeal Tribunal’s judgement is not only binding as relevant case law, it is also a timely reminder for contractors that self-employment is a balancing act with distinct advantages and many disadvantages. The details of the case of Welsh vs Brookson Ltd and British Nuclear Fuels require only a brief summation. In short, Mr Welsh was an employee and shareholder in a composite company set up for him by Brookson that was designed to give him specific tax advantages. He was then placed with BNFL through an agency. After being told his services were no longer required he chose to lodge a claim for unfair dismissal and wrongful dismissal, breach of contract and failure to provide written reasons for dismissal against both BNFL and Brookson. After the initial Employment Tribunal, the matter was referred to an Employment Appeal Tribunal (EAT), which found that the original Tribunal had made a critical error in assuming that Mr Welsh and BNFL intended to create legal relations and to enter into a contract of employment. This conclusion is great news for contractors generally, unless of course you intend to be making use of the Employment Tribunal system. Even with a contractor claiming to be an employee of the end client, in this case the end client was BNFL a former government body with a tradition of heavily trade-unionised working practices, it was impossible to prove employment without an actual contract. The Chairman of the EAT also recognised the legitimacy of Brookson as a composite company and even cited the legislation enabling such an arrangement. Brookson, based upon expert advice, chose not to appeal the Employment Tribunal's initial decision but, rather chose to support BNFL's appeal, acknowledging the specific factual circumstances of the case. Brookson's approach has helped to ensure that the end client's position has been protected. We are clearly beginning to see the first signs that the Courts and Employment Tribunals are recognising that the status of contract workers is different from regular workers and that they are not merely “disguised employees”. They are also recognising and accepting that the sort of composite company being used by many of these workers is a legitimate way of organising an individuals financial affairs. I believe the conclusions of the Tribunal should serve as a reminder that employment status cannot be changed to suit the circumstances of the time - a fact which applies to both contractors and to the Inland Revenue in respect of IR35. IR35 is clearly still an enormous learning curve for contractors, agencies and end clients. Proper observation of the IR35 regulations from outset will ensure that contractors who have chosen the self-employed route from the outset, will not be regarded as being "disguised employees" when the taxman comes knocking. Rick Nevinson Managing Director Brookson Ltd Mar 11, 2003 Email this article Printer friendly page Previous Page
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