The recent case of Dragon Consultancy Limited v Revenue & Customs Commissioners proves helpful guidance into the ongoing saga of IR35 and whether an individual is self-employed or employed for tax purposes.
The company was a sole employee director business that specialised in IT systems testing. The sole director owned 50% of the shares. The sevrices of the director were provided via the company to agencies and to end users.
The agency concerned-A-had a client relationship with the end user business-C--and provided D's services as a consultancy. In turn the agency had a fixed term contact with Dragon-D. There was no written contract between the director and the company however.
After three exclusive contracts with C of seven,nine and twenty two months the special commissioner agreed with the respondent commissioner's conclusion that D was liable to pay the director's NI contributions and PAYE income tax as if he were an employee.
The conclusion was reached as if the services had been provided between the director and C the director would be regarded as an employee for tax purposes.
In agreeing with the earlier conclusion reference was amde to all the circumstances of the case including the right to provide a substitute worker which had to be agreed by C. A limited right of substitution was comptaible with a relationship fo employment and Express & Echo Publications Ltd v Tanton (1999) was distinguished.
Also of relevance was the issue of supervision which went beyond directing the director when and where to work. It was not expected of a skilled worker that how the work was to be done would be controlled in a consultancy relationship. Regular appraisals and monitoring here would not be expected for a self-employed consultant-though a caveat would need to be added for professionals who are required by their governing bodies to so monitor and supervise.
Of course each case is different and if your own case is of concern then you are advised to have your own bespoke conditions analysed carefully to assess your employment situation.
