IR35: Control

Control is one of the fundamental tests for IR35 and has been since it was introduced in 2000. 

The question of whether a worker is truly independent when working under a contract between it and the end-client (irrespective of whether through an intermediary personal service company), has been and remains central to whether the worker falls outside IR35.

The tests applied have always dealt with how much the worker is controlled by the end-user who pays for the service which is contractually provided. The more factors showing independence of work behaviour, choice of how and when to work etc, continue to indicate a scenario where IR35 does not apply. Although the Business Entity Tests introduced by HMRC in 2012 were withdrawn in 2015, these were only withdrawn as research showed they were not being widely used. However, the spirit of those tests remain. The more factors which indicate that a worker is not “controlled”, the more persuasive the argument that there is not an employer/ employee relationship for tax purposes and the consequences that this carries.

Such factors are considered by one of the newest tools made available to the public by HMRC with its introduction in March 2017 of its online Employment Status Service which is designed to allow users to determine whether they should be treated as employed. It’s here.

HMRC’s guidance includes common factors which help indicate how an individual should be treated for employment tax purposes. This includes the right of control. To be deemed an employee, there must be evidence of a certain degree of control by the person/entity which engages the worker to carry out the required contractual function. The element of control emerges where, for example, the worker is influenced or directed as to how to perform the service contracted, such as dictating the place of work, time of work, and how it is to be performed. It is the right of control that is relevant and so the control need not actually be enforced in practice in order to fall into the IR35 regime.

Case law to illustrate the issues is not restricted to tax cases on IR35 decisions but is extended to cases from the Employment Tribunal as the decision to treat a person as an employee obviously has consequences which extend beyond tax to the employer’s duties/ employee’s rights. In this arena, there have been some high-profile cases.  These include:

  • Pimlico Plumbers Ltd and Mullins v Smith [2017] – the contract stated the worker was an independent contractor who had to raise his own invoices and was VAT registered. However, he worked full time providing services to the plumbing company and was required to wear a uniform, drive a van which advertised the plumbing company and was subject to restrictive covenants. The Tribunal found when considering the amount of control placed upon the worker by the plumbing company that he should not be treated as self-employed.
  • Aslam and others v Uber BV and others – the employment tribunal found that drivers contracted with Uber to drive customers of Uber. Uber was not a customer or client of the drivers. As such, it was found that the drivers were workers for Uber.

Conversely, there is also case law where it has been found the worker has not been considered to be a worker and thus, is treated as being self-employed for the purposes of IR35 due to other factors.

There is no clear line to show where the IR35 axe falls but it is clear that the element and degree of control remains one of the main factors which will be considered when assessing whether a person is truly self- employed.

Written by Jonathan Wright, tax investigation solicitor and partner at Richard Nelson LLP

Editor's Note: Further Reading -

Contractors' Questions: Can a lack of control save me from IR35?

IT contractor JLJ in first ever 'split IR35 case'

IR35 calculator

IR35 substitution  IR35 control  IR35 mutuality of obligation

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