The hardest IR35 factor to consider/argue? The biggest IR35 headache for contractors? On both fronts, it's MOO.
Mutuality Of Obligations ('MOO' or even sometimes 'MoO') can sometimes be referred to as an extension of personal service. However, Mutuality has become a key IR35 factor in its own right, writes David Harmer, a director at Markel Tax.
This comprehensive IR35 guide explains why MOO is the most challenging employment status test for UK contractors, covering key case law, HMRC's approach, and practical implications for contractor IR35 compliance in 2025/26.
What's needed for a contract? 3 elements of employment status
In the landmark Ready Mixed Concrete ("RMC") judgment, Mackenna J outlined three key requirements as the bare bones of what is needed for a contract of employment to exist under UK employment law:
The 3 Essential Elements of Employment Status
- In return for payment, the worker agrees to provide their own work or skill;
- The worker will be subject to control in a sufficient degree, and;
- Other provisions within the contract are consistent with employment.
Key Point: At the first test of RMC, there needs to be an obligation to provide services at all. This is where Mutuality of Obligations becomes crucial for IR35 status determination.
The Ready Mixed Concrete case established these fundamental principles that continue to guide IR35 determinations and employment status tests in 2025/26.
As an IR35 'test,' what is Mutuality of Obligation for contractors?
Fundamentally, MOO tests whether the end-client is obliged to provide the contractor with work, and whether the contractor is obliged to undertake work. This is a crucial employment status factor for IR35 determinations.
In 2025/26, HMRC's view is that, at a basic level, where work is provided for remuneration, a contract exists and therefore the factor of Mutuality of Obligations is always present. This simplified approach creates challenges for contractors seeking outside IR35 status.
Contractors will find hardly any MOO in CEST
This reasoning from the Revenue is why Check Employment Status for Tax (CEST), which is HMRC's IR35 status testing tool, does not consider MOO, except for a small 'gateway' question inserted in May 2025.
However, case law guidance confirms that while the existence of a contract (of any kind) will mean that offer and acceptance are present at stage 1 of the 'RMC' test, the nature and extent of any such obligations must also be considered at stage 3 of RMC.
The issue is not disposed of simply by determining whether a contract (in its true legal definition and formation) exists.
Mutuality in the courts: key IR35 cases
The case of Nethermere (St Neots) v Taverna and Gardiner [1984] confirmed that for employment to exist, there must be an "irreducible minimum of obligation on each side".
If such obligation is not present, "there can be no contract of service. On the employee's side, this involves an obligation to perform work for the employer".
How contractors should look at Mutuality of Obligations
Interestingly, MOO (sometimes referred to as just 'Mutuality') was inferred in the Nethermere case through continuous offer and acceptance of work, rather than contractual provisions.
MOO can be looked at as MOO within the contract and MOO between contracts.
The Prater case — a cautionary Mutuality tale
The case of Cornwall County Council v Prater [2006] dealt with a teacher who was engaged by Cornwall County Council under a succession of separate contracts for a period of 10 years.
The council would offer Prater a pupil to tutor at their home, and she was free to reject work without penalty. However, once she accepted a pupil, she was obliged to fulfil her commitment to that pupil, and the council would offer work until that engagement was fulfilled.
It was found that each individual contract, regardless of how short it was, contained MOO and therefore had to be a contract of employment.
Outside IR35 contractors must avoid the 'have to see it through' feeling
Once the pupil was accepted by Prater, both parties had to see it through, and this was enough to create an employment relationship.
Yet, due to the fact that once an engagement ended, there was no obligation for either party to accept/offer further pieces of work, the judge warned that an overarching contract (sometimes referred to as an 'umbrella contract') of employment would be impossible to prove. The point of umbrella/overarching contracts is most pertinent to the issue of continuity of employment for eligibility to certain employment rights.
The Carmichael case found no Mutuality between assignments
On the other hand, the case of Carmichael and Another v National Power Plc [1999] determined that part-time guides engaged by power stations were not employees, as the House of Lords found that as there was no MOO between assignments, there was no overarching contract.
More importantly, there was no obligation to accept any work at all with the contract, "but at best assumed moral obligations of loyalty in a context where both recognised that the best interest of each lay in being accommodating to the other."
PGMOL provides a significant update on Mutuality of Obligations
The most recent case which provided significant commentary on Mutuality, was PGMOL v HMRC [2024] at the Supreme Court.
The tribunal had made findings of fact that football referees engaged by PGMOL were not under any obligation to accept any matches offered to them; however, once they had accepted, they were obliged to referee and then provide a report following the game.
The ability to accept/reject work doesn't pass the MOO test
In PGMOL, though no overarching contract was found as there was no obligation to offer/accept future work, the Supreme Court held that a contract of employment could still exist during the period where the individual was doing the work.
Somewhat following the reasoning in Cornwall County Council v Prater, the ability to accept/reject work, on its own, is not sufficient to demonstrate that there is no mutuality at the first stage of RMC.
Termination and Mutuality Of Obligations
Further, the judges in PGMOL found that the ability to terminate an agreement once it had been accepted did not negate the existence of mutuality of obligations at the first test of RMC. That is to say, while a right to terminate an agreement may be a pointer towards self-employment at the third test — i.e. when looking at the engagement as a whole — it does not remove mutuality of obligations at the first stage.
The IR35 headache that is Mutuality in 2025/26
As a professional who defends contractors from HMRC under IR35, I can assert that MOO is the hardest employment status factor to consider and argue against, due to some inconsistency between judgments and the many different ways in which MOO can manifest in reality.
Adding HMRC's simplistic view of Mutuality Of Obligations (i.e. MOO always being present in a contract of any kind) means Mutuality can quickly become a major headache for contractors seeking IR35 compliance and outside IR35 status.
For these reasons, contractors should not rely solely on MOO when determining their IR35 position. A comprehensive approach considering all employment status factors, including personal service, control, and mutuality of obligations, is essential for proper IR35 compliance in 2025/26.
Author: David Harmer, Director at Markel Tax
