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View Full Version : HMRC deliberately omitted MOO from ESS/CEST



TheFaQQer
31st October 2017, 09:52
Q: If Hired for future work for pay means you have mutuality of obligation, when would you not have mutuality of obligation? It is a test, not a given, in employment law is it not?.
A: It would rarely if ever be be the case in public sector hiring. That is why we did not put questions into the tool about it.

Q: Umbrella companies are saying you're okay due to mutuality of obligation being in point?
A: Yes we have seen people assert this in the past as if it were a magic bullet. But it it is important to actually have regard to the terms under which NHS locums are engaged. They are offered work, in
advance, a particular shift or series of shifts and they cannot simply walk away from that work without meeting their obligation. They are contractually entitled to pay for these shifts. So all the minimum elements are present.

Not sure I agree with their definition of MOO :eyes

northernladuk
31st October 2017, 10:06
Looks like the same classic mistake we've seen plenty of times on here.

eek
31st October 2017, 10:07
Once again HMRC dance on the edge of a pin to ensure the information matches their interpretation and not the actual law..

malvolio
31st October 2017, 10:29
The case law actually talks about an irreducible mutuality of obligation. That leaves room for interpretation of what is a "reasonably" (another legally valid term) irreducible minimum. Turning up for work you have agreed to does not therefore mean a mutuality; having to turn up whether you have agreed or not or be penalised in some way (such as no more work will be offered) is.

All, of course, IMVHO.

TheFaQQer
31st October 2017, 10:35
The case law actually talks about an irreducible mutuality of obligation. That leaves room for interpretation of what is a "reasonably" (another legally valid term) irreducible minimum. Turning up for work you have agreed to does not therefore mean a mutuality; having to turn up whether you have agreed or not or be penalised in some way (such as no more work will be offered) is.

All, of course, IMVHO.

From the HMRC slide deck explaining the rules to NHS people:

Myth: There is no ‘mutuality of obligation’ in my contract therefore I am self-employed.

It doesn’t make me self-employed. There is ‘mutuality of obligation’.

:eyes

meanttobeworking
31st October 2017, 11:26
So would I be right in thinking that, even by HMRC’s twisted definition of MOO, if a contractor is engaged for a period of time, and during that time the engager on occasion says “sorry, no work for today, don’t come in and don’t invoice”, that demonstrates a clear lack of MOO and should be kept as pretty compelling evidence that the arrangement is outside IR35 on the basis of no MOO?

And if I’m wrong, what *would* be a clear demonstration?

meanttobeworking
31st October 2017, 12:17
Further to the above, this article seems to suggest this might be the case:

https://www.qdosaccounting.com/ir35-meaning-of-moo/



This was demonstrated in another IR35 case, Marlen Ltd v HMRC (2011), which was heard before the First Tier Tax Tribunal. Mr Hughes (contractor) provided engineering, design and drafting services to JCB. There were some occasions when the computer servers broke down, and the contractors were sent home, without pay, whereas JCB employees remained in place and were remunerated. This showed that JCB did not consider itself under any obligation to provide work or pay even after an offer had been made and accepted. Marlen terminated the contract early when a better off came along, further confirming that both parties understood that the contract could be terminated at any time and without consequence. The Tribunal, therefore, had no hesitation in concluding that the relationship between contractor and end client was one in which MOO was not present.

malvolio
31st October 2017, 13:05
Further to the above, this article seems to suggest this might be the case:

https://www.qdosaccounting.com/ir35-meaning-of-moo/

Precisely. That has been the case right back to the original RMC case in the 70s. HMRC are either ignorant of the fact, or are deliberately lying to their audience. Either option is totally deplorable.

The weakness here is that FTTs do not define case law, which would be HMRC's defence. It needs an appeal in a higher court. However going back to earlier cases, the test is twofold; the employer has to offer work and the worker has to accept it. I don't see that the NHS has to offer work to a given locum, nor does the locum have to accept it (although if he does then he has to deliver the work). I contend that fails to the demonstrate the level of MoO needed to define the locum as an employee.

A neat summary of the whole "are you an employee" argument is here (https://www.lawteacher.net/free-law-essays/employment-law/distinction-between-employees-and-self-employed.php).

northernladuk
31st October 2017, 13:12
Isn't just the mention of locums a problem. There has been plenty of opinion they were inside anyway so a poor indicator of anything that would affect us?

malvolio
31st October 2017, 13:44
Isn't just the mention of locums a problem. There has been plenty of opinion they were inside anyway so a poor indicator of anything that would affect us?

No. Distinguish between locums that take on longer contracts compared to those who are used to fill in gaps in resources on an as-needed basis. The former may be depending on their contracts and Ts&Cs, the latter probably aren't. The "disguised employee" argument remains unchanged.

Even for the former group, they could also argue that they are employed by an NHS trust for each contract and that trust does not have to renew the contract on completion, which blows HMRC's argument that they are employees of the NHS as a whole.

If it were black and white, we wouldn't be arguing about IR35 after 20 years...

SueEllen
31st October 2017, 13:53
No. Distinguish between locums that take on longer contracts compared to those who are used to fill in gaps in resources on an as-needed basis. The former may be depending on their contracts and Ts&Cs, the latter probably aren't. The "disguised employee" argument remains unchanged.

Even for the former group, they could also argue that they are employed by an NHS trust for each contract and that trust does not have to renew the contract on completion, which blows HMRC's argument that they are employees of the NHS as a whole.

If it were black and white, we wouldn't be arguing about IR35 after 20 years...

NLUK is arguing about what level the locum is. If the locum is a consultant then clearly would be easier to argue they are out of IR35 but lower levels are considered to be needing supervision.

meanttobeworking
31st October 2017, 14:17
Precisely. That has been the case right back to the original RMC case in the 70s.

So in the case of an IT Contractor, gathering evidence for at least one, but ideally as many of the following points as possible for each contract, alongside carrying IPSE Plus membership and arguably IR35 insurance *should* place them in a reasonably comfortable position in case of investigation? Not withstanding any HMRC dirty tricks.

1.
- the client would accept a suitable substitute

2.
- the client would send them home in the absence of work
AND
- the client is not under obligation to extend a contract
AND
- the contractor is not under obligation to accept an extension

3.
- the contractor and the client discuss and agree ways of working (rather than the contractor takes instruction from the client)
AND
- the contractor is not obliged to accept changes to the initially agreed deliverables, and any agreed changes are documented appropriately

SeanT
31st October 2017, 16:34
So in the case of an IT Contractor, gathering evidence for at least one, but ideally as many of the following points as possible for each contract, alongside carrying IPSE Plus membership and arguably IR35 insurance *should* place them in a reasonably comfortable position in case of investigation? Not withstanding any HMRC dirty tricks.

1.
- the client would accept a suitable substitute

2.
- the client would send them home in the absence of work
AND
- the client is not under obligation to extend a contract
AND
- the contractor is not under obligation to accept an extension

3.
- the contractor and the client discuss and agree ways of working (rather than the contractor takes instruction from the client)
AND
- the contractor is not obliged to accept changes to the initially agreed deliverables, and any agreed changes are documented appropriately

Amen. Until they move the goalposts again.

meanttobeworking
1st November 2017, 15:06
So if it really does boil down to that, wouldn’t any client gladly confirm at least number 2 (and why wouldn’t they?), at which point I ask my self why we are all so worried?

Come on Malvolio and NLUK, tell me why this is too simple :)

meanttobeworking
3rd November 2017, 08:44
Well, looks like I just solved IR35 then [emoji3]

eek
3rd November 2017, 08:52
Well, looks like I just solved IR35 then [emoji3]

Nope because 2 is no different from a zero hour contract which would be under PAYE....

ChimpMaster
3rd November 2017, 09:48
So in the case of an IT Contractor, gathering evidence for at least one, but ideally as many of the following points as possible for each contract, alongside carrying IPSE Plus membership and arguably IR35 insurance *should* place them in a reasonably comfortable position in case of investigation? Not withstanding any HMRC dirty tricks.

1.
- the client would accept a suitable substitute

2.
- the client would send them home in the absence of work
AND
- the client is not under obligation to extend a contract
AND
- the contractor is not under obligation to accept an extension

3.
- the contractor and the client discuss and agree ways of working (rather than the contractor takes instruction from the client)
AND
- the contractor is not obliged to accept changes to the initially agreed deliverables, and any agreed changes are documented appropriately


It's not that simple when using CEST. I played around with CEST the other day for fun, hence my post http://forums.contractoruk.com/accounting-legal/124347-hmrc-online-test-ir35.html

The CEST tool is weighted towards a HMRC victory on pretty much every question. Even for the 3 areas you list above, if you look at CEST the questions do not give the consultant much chance of getting through unscathed. I won't repeat what I said in my post as there's too much info but to summarise: CEST will screw you unless you can answer very specifically, or you can force the client to take on a substitute without even approving that person.

meanttobeworking
3rd November 2017, 09:54
Agreed. To be fair I’m talking about private sector IR35 defence, and this is in the public sector area of the forum, so I probably should have been clearer.

malvolio
3rd November 2017, 10:27
Agreed. To be fair I’m talking about private sector IR35 defence, and this is in the public sector area of the forum, so I probably should have been clearer.
Nevertheless (and this answers your earlier question btw) the debate is not about what HMRC believe to be the situation, it's about what the laws says the situation is. If you appeal an initial decision of inside to firstly the FTT and then again at the higher level, the decision will be based on real case law and the real circumstances of the engagement. What the CEST or anything else says about it is utterly irrelevant.

The law surrounding IR35 has not changed at all and the usual remedies still apply. The CEST is merely one way to make an initial assessment, it cannot be definitive. The only good thing is that if you are found inside on a gig advertised as outside you won't be picking up the bill - unless you've signed something really silly in your contract about who is the fee payer.

meanttobeworking
3rd November 2017, 10:29
Nope because 2 is no different from a zero hour contract which would be under PAYE....

So in your view, how would one demonstrate lack of MOO?

malvolio
3rd November 2017, 10:41
So in your view, how would one demonstrate lack of MOO?
It's not about "lack", it's about an "irreducible minimum". There will always be a degree of mutuality or anarchy would reign*; the question is about the balance between the two parties' needs. The ability to determine where you sit to deliver the work is one (and only one) example of a wider picture.


* for example, you work, you invoice, the client says "CBA to pay that, sorry"....

northernladuk
3rd November 2017, 10:52
It's not about "lack", it's about an "irreducible minimum". There will always be a degree of mutuality or anarchy would reign*; the question is about the balance between the two parties' needs. The ability to determine where you sit to deliver the work is one (and only one) example of a wider picture.


* for example, you work, you invoice, the client says "CBA to pay that, sorry"....

This. If we are going to take HMRC on over this we need to understand it better ourselves.

meanttobeworking
3rd November 2017, 18:37
This. If we are going to take HMRC on over this we need to understand it better ourselves.

What kind of things do you look out for then, other than what’s been mentioned? What would be good evidence to keep, or situations to avoid?