Back on topic, in case anyone finds it useful here is the wording of the appeal.
Re. IR35 Status Determination Statement issued on 03/03/2020
I wish to appeal the inside determination on the following grounds.
1. The determination has been issued in the name of Company X Ltd and not Company Y Ltd. who are the named client on the contract schedule. The service provider has no business relationship with Company X Ltd.
2. The determination has not taken account of all of the irreducible minimums required for a contract of employment to exist. These are :
• Is there a requirement for the worker's personal service?
• Is there a sufficient degree of control over the worker?
• Are the mutual obligations of the contract consistent with employment?
As established in the high court by McKenna J in Ready Mixed Concrete Ltd V Social Security Minister 1968, for a contract of employment to exist all three questions must have positive answers.
Specifically, the determination has not addressed mutuality of obligation within the contract.
3. Mutuality of Obligation
In order for a contract of employment to exist there must be Mutuality of Obligation between the parties concerned. HMRC specify that this must be established before any Employment Status Determination can be made or the CEST tool applied. c.f. HMRC Paper on Mutuality of Obligation. “CEST does not explicitly look at MOO, it is designed to determine whether an existing or future contract will be one of employment or self-employment. It is assumed that a person using CEST will have already established MOO, which is necessary for a contract to exist, otherwise there would be no need to be using CEST to determine the status of the existing or hypothetical contract.”
O’Kelly V Trusthouse Forte 1983 , Carmichael V National Power and others asked the question “Is there an obligation to offer and an obligation to accept future work.” In both cases the answer was no and therefore the courts found that there was not sufficient mutuality of obligation to form a contract of service (employment) as opposed to a contract for services.
In the case of this determination there is no such obligation.
o Neither party is obliged to offer or accept work. There is no obligation on either side that contracts would be extended on completion and no obligation that such an extension would be accepted should it be offered. On at least one occasion the service provider has refused an offered extension or WBA have not offered one and subsequently replaced the company providing services with another.
o Within the operation of each contract period the Client are not obliged to offer work to the Company and the Company is not obliged to accept such work if it is offered. Individuals are free to balance their own workload and accept or reject requests from client managers as they see fit within the terms of the contract to provide services. Where Individuals do not work as a result of refusing work or work not being supplied, the service provider will not be paid for the relevant periods.
o At such times as there is no demand for the service provider to provide services, such as over the Xmas period, the Client are not obliged to provide such work nor pay the service provider for those days.
There is no Mutuality of Obligation between the parties in this case.
4. Substitution :
Substitution addresses the requirement for personal service. Without the need for the services to be delivered by a specified individual there can be no contract of employment.
The determination on Substitution has not taken account of judgements in McMenamin V Diggles (1991) and subsequently Express & Echo V Taunton (1999) that established that the fact that the substitute must meet obvious and reasonable criteria to be able to undertake the work does not compromise the contractual right to substitute. It also mis-interprets the meaning of an Unfettered Right of Substitution which refers to the fact that the Client may not trigger the substitution themselves, nor specify the manner in which the substitute is to be provided, for example by insisting that they select the substitute or that it is provided via the same agency through which the service provider has been engaged or from a specific pool of candidates.
The right of substitution is valid and there is no requirement for personal service.
5. Control:
To establish that a sufficient degree of control exists to satisfy the minimum requirement there must be a right of control over how the services are performed. This was established in McManus V Griffiths (1997).
While the service provider may make reasonable reports to Client management on progress of work, that work is not carried out under the supervision of the client. The client provides no instruction to the service provider on how the work is to be performed, where it is performed other than for reasons of practicality, or the hours to be worked in delivery of the services. This is established in paragraph’s 2.2, 2.3, 2.6, and 2.8 of the contract.
The client does not exercise a right of control.
6. Financial Risk
Financial Risk is not one of the established irreducible minimums for a contract of employment to exist. Notwithstanding this the service provider carries the financial risk and liability for correction of substandard or faulty work and costs arising from such. c.f. Para. 2.8 of the contract.
7. Reasonable Care
I do not believe that the client has exercised reasonable care in making this determination. The individuals charged with carrying it out have no relevant experience with the legislation and have not sought professional advice on the matter. They have not accounted for Mutuality of Obligation as a principle of employment status and they have not taken the care to inspect the contracts in place throughout the chain of engagement.
On the basis of these facts I do not believe that the issued SDS is correct and should be amended to reflect an Outside status with regard to IR35.
Re. IR35 Status Determination Statement issued on 03/03/2020
I wish to appeal the inside determination on the following grounds.
1. The determination has been issued in the name of Company X Ltd and not Company Y Ltd. who are the named client on the contract schedule. The service provider has no business relationship with Company X Ltd.
2. The determination has not taken account of all of the irreducible minimums required for a contract of employment to exist. These are :
• Is there a requirement for the worker's personal service?
• Is there a sufficient degree of control over the worker?
• Are the mutual obligations of the contract consistent with employment?
As established in the high court by McKenna J in Ready Mixed Concrete Ltd V Social Security Minister 1968, for a contract of employment to exist all three questions must have positive answers.
Specifically, the determination has not addressed mutuality of obligation within the contract.
3. Mutuality of Obligation
In order for a contract of employment to exist there must be Mutuality of Obligation between the parties concerned. HMRC specify that this must be established before any Employment Status Determination can be made or the CEST tool applied. c.f. HMRC Paper on Mutuality of Obligation. “CEST does not explicitly look at MOO, it is designed to determine whether an existing or future contract will be one of employment or self-employment. It is assumed that a person using CEST will have already established MOO, which is necessary for a contract to exist, otherwise there would be no need to be using CEST to determine the status of the existing or hypothetical contract.”
O’Kelly V Trusthouse Forte 1983 , Carmichael V National Power and others asked the question “Is there an obligation to offer and an obligation to accept future work.” In both cases the answer was no and therefore the courts found that there was not sufficient mutuality of obligation to form a contract of service (employment) as opposed to a contract for services.
In the case of this determination there is no such obligation.
o Neither party is obliged to offer or accept work. There is no obligation on either side that contracts would be extended on completion and no obligation that such an extension would be accepted should it be offered. On at least one occasion the service provider has refused an offered extension or WBA have not offered one and subsequently replaced the company providing services with another.
o Within the operation of each contract period the Client are not obliged to offer work to the Company and the Company is not obliged to accept such work if it is offered. Individuals are free to balance their own workload and accept or reject requests from client managers as they see fit within the terms of the contract to provide services. Where Individuals do not work as a result of refusing work or work not being supplied, the service provider will not be paid for the relevant periods.
o At such times as there is no demand for the service provider to provide services, such as over the Xmas period, the Client are not obliged to provide such work nor pay the service provider for those days.
There is no Mutuality of Obligation between the parties in this case.
4. Substitution :
Substitution addresses the requirement for personal service. Without the need for the services to be delivered by a specified individual there can be no contract of employment.
The determination on Substitution has not taken account of judgements in McMenamin V Diggles (1991) and subsequently Express & Echo V Taunton (1999) that established that the fact that the substitute must meet obvious and reasonable criteria to be able to undertake the work does not compromise the contractual right to substitute. It also mis-interprets the meaning of an Unfettered Right of Substitution which refers to the fact that the Client may not trigger the substitution themselves, nor specify the manner in which the substitute is to be provided, for example by insisting that they select the substitute or that it is provided via the same agency through which the service provider has been engaged or from a specific pool of candidates.
The right of substitution is valid and there is no requirement for personal service.
5. Control:
To establish that a sufficient degree of control exists to satisfy the minimum requirement there must be a right of control over how the services are performed. This was established in McManus V Griffiths (1997).
While the service provider may make reasonable reports to Client management on progress of work, that work is not carried out under the supervision of the client. The client provides no instruction to the service provider on how the work is to be performed, where it is performed other than for reasons of practicality, or the hours to be worked in delivery of the services. This is established in paragraph’s 2.2, 2.3, 2.6, and 2.8 of the contract.
The client does not exercise a right of control.
6. Financial Risk
Financial Risk is not one of the established irreducible minimums for a contract of employment to exist. Notwithstanding this the service provider carries the financial risk and liability for correction of substandard or faulty work and costs arising from such. c.f. Para. 2.8 of the contract.
7. Reasonable Care
I do not believe that the client has exercised reasonable care in making this determination. The individuals charged with carrying it out have no relevant experience with the legislation and have not sought professional advice on the matter. They have not accounted for Mutuality of Obligation as a principle of employment status and they have not taken the care to inspect the contracts in place throughout the chain of engagement.
On the basis of these facts I do not believe that the issued SDS is correct and should be amended to reflect an Outside status with regard to IR35.
Comment