Kaye Adams' ruling on substitution will be comfort to contractors – lawyer

One of the more subtle aspects of the Kaye Adams judgment, Substitution, could provide a leg-up to contractors facing the hurdle of IR35 reform, even if they haven’t substituted.

In the case, the broadcaster said “of course not” in answer to the question of whether she was entitled to send a substitute, on her 2015/16 and 2016/17 contracts with BBC Radio Scotland.

But despite asserting she lacked this key feature of a self-employed contract, judge Jonathan Richards went on to determine that Ms Adams’ right of substitution was “quite realistic.”  

'Will be of comfort to contractors'

In fact, perhaps because it operated in a narrow set of circumstances and hadn’t been used by her, the 58-year-old was simply unaware of her sub clause, explains legal expert Matt Sharp.

“Adams did not consider that she could send a substitute in practice, but the UT held ‘that simply demonstrates that she did not know all of the terms of the Written Agreement.’

“This statement [and finding of the clause to still be realistic], will be of comfort to contractors seeking to rely on a genuine substitution clause”.

'Even if the clause is not regularly used'

A contentious tax law specialist for Fieldfisher, Sharp continued: “And it will be of comfort even if the clause is not regularly used, in any bid to uphold self-employment.”

Other aspects of the UT’s ruling which have been similarly overlooked until now, partly because of the significance of in-business-factors quashing an inside IR35 ruling, are exercising experts too.

“As is often the case, judgments such as this one beg more questions than they answer,” says Bauer & Cottrell co-founder Kate Cottrell.

“In particular, why did HMRC drop the previous two years contracts, covering 2013/14 and 2014/15, when they were faced with ‘identical’ contracts?”

'Might set the tone for IR35 disputes once the new off-payroll rules pass'

Another adviser to contractors, who declined to be named, reflected of the Adams ruling: “The case was poorly argued by HMRC.

“The overriding view is that HMRC has not covered itself in glory thus far on high-profile IR35 cases, due to poor preparation and weak technical grounds for cases, which might set the tone for disputes following the April 6th reforms.”

Hays, the FTSE-listed recruiter, yesterday said it has sent a letter to HM Treasury ahead of today’s Budget 2021, calling for the new off-payroll rules to be delayed by 12 months.

'Reform will reduce the UK's attractiveness'

“When the reforms passed legislation, it was on the basis that the economy would be recovering,” Hays managing director Simon Winfield said of the letter, which is backed by both the REC and CBI.

 “But even with the roadmap out of lockdown there is considerable economic uncertainty and real concern that the reforms are somewhat premature.

“Not only is the financial gain for the government likely to be less than estimated, it will provide a financial burden and distraction to the companies that are essential to our economy. It will also hit temporary workers with additional costs at a time they can least afford it, has the potential to have a devastating effect on our flexible workforce and will reduce the attractiveness of the UK as a place to live and work.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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