Mutuality of Obligations: How outside IR35 contractors can keep MOO at bay

Mutuality of Obligations is the most difficult of the fundamental IR35 tests to fully get to grips with -- it is noticeably absent from HMRC’s own CEST, and tribunal decisions focusing on Mutuality of Obligations are not always clear, writes David Harmer, associate director of Markel.

So, what do we mean when we talk of Mutuality of Obligations (MOO)? 

Mutuality: the taxman's take

HMRC’s guidance states:

The basic requirements as to the mutual obligations necessary to determine whether there is a contract in existence at all are:

  • that the engager must be obliged to pay a wage or other remuneration, and
  • that the worker must be obliged to provide his or her own work or skill.

These basic requirements could be present in either a contract of service or a contract for services which, on their own, will not determine the nature of a contract.

This stance from HMRC reduces Mutuality to nothing more than effectively ‘work for wage.’ 

Mutuality of Obligations in the eyes of the court...

When we look at case law however (and even the latter tribunal cases), it becomes clear that Mutuality of Obligations is more than simply payment for work done. It is a higher level of commitment and obligation between the person who requires the services, and the person who provides the services.

It is an inherent obligation on the engager to provide work, coupled with an obligation on the worker to undertake the work.

Fundamentally, then, your written contract as an IT contractor can help to express a lack of MOO and, as always, setting clear intent at the start of an engagement can prove invaluable at a later date.

Chiefly, the contract should show a clear lack of obligation for work to be provided by the engager and clear lack of obligation on the contractor to undertake any such works if offered.  This should apply to both the work during the current engagement and work following the engagement. 

Specified services

While there must be a service required by the engager which can be accepted by the contractor (otherwise there could be no contract at all), the works should be specified -- in as precise detail as possible. 

A contract with a vague scope of works which allows the engager to add or amend as they see fit, without the need for negotiation, would suggest there is mutual obligation of providing and undertaking works.

New schedules, or scopes of work, should be entered into for any additional services offered and accepted.


Even though the engager has entered into contract for the need of a specified service, the contract should include a clear provision showing there is no obligation on the engager to provide works to the contractor, either during the lifetime of the initial engagement or at any time after the engagement has ended.

Likewise, the contract should provide a clear statement that the contractor is not obliged to make its services available to the engager either during or after the current engagement. 

These express statements will demonstrate the intent at the commencement of the relationship and clarify expectations from the outset.

Right to terminate

While the right to terminate, of itself, does not directly impact MOO, it can cause some issues.

Where both parties do not have a right to terminate the contract at will, or if the contractor, for example, must provide three months’ notice under a three-month contract, this may suggest to the courts that there is some inherent obligation between the parties beyond a simple arms-length transaction to provide services. 

Where both parties can terminate the contract simply because they want to, with little-to-no notice, it helps to demonstrate there is no obligation to each other.


Although the written terms provide a solid foundation, it must be reflected in the day-to-day working arrangements. This means engagers and contractors should not let contracts run on indefinitely, and any renewals should provide specific details of the services required under that extension. 

This provides a clear paper trail showing the reason for any continued service provision is due to a need for additional services by the engager and the contractor’s want to accept to provide services -- rather than because of a mutual obligation or providing and undertaking work that has built up over time.

Difficult to rely on

These practical pointers will help to demonstrate a lack of mutuality of obligations, however given the nature of HMRC enquiries (and their view of Mutuality), it is likely that a lack of mutuality alone -- without a lack of personal service or lack of control -- will not be enough stop an HMRC enquiry under the IR35 legislation. It would, though, deliver persuasive evidence at tribunal-level.

Above all, while it is always best practice to demonstrate a lack of mutuality of obligations as robustly as possible, it is only one of the three fundamentals and if it is not possible to fully demonstrate a lack of Mutuality due to the reality of the engagement, then attention should be placed on a lack of personal service or lack of control.

Friday 14th Apr 2023
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Written by David Harmer

David began his career with Markel Tax at 18 and has since spent 10 years with the business, completing a law degree and working his way through the ranks of tax consultant to director. Defending tax payers against HMRC challenges on all areas of contentious tax law including IR35, self-employed status, CIS, agency legislation etc., his tribunal victories include the well-known Sherburn Aero Club case.
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