The level of control exercised by the client over the services which are to be provided, as well as the manner in which they are provided, when they are provided, and where they are provided is very important for determining IR35 status.
It is acceptable for a contractor to mutually agree to execute a set task at a time and location specified by the client, but they should not be subject to any control or supervision from the client; it should be clear that the contractor is able to execute the work according to how they decide. Alternatively, an employee will probably have set times and locations for work; as shown in the case of Morren v Swinton and Pendlebury Borough Council (1965).
Having said this, in order to show that control is present, it needs to be a lot more than just shallow monitoring or reviewing of outputs. As per the case of [Chaplin v Australian Mutual Provident], unless the contractor is tied "hand and foot" to the client, control would not be so much as detrimental.
If a contractor is being controlled by their client, this will be made clear, as they will be regularly directed on the work that needs to be completed by a manager or supervisor, with regular monitoring of the progress of work. In the event that a client is able to move the contractor from one job to another as a result of a change in priority, there could be considered a right of control over what is to be done – that is very much indicative of employment. [Stagecraft Ltd v Minister of National Insurance (1965)]
Usually, a contract for services would state where the services are to be provided from, or may state whether a contractor may provide the services from a location of their own choice. In circumstances where the end client site is a secure location, for example a bank, it is understandable for security reasons that the contractor cannot provide the services from any other location. On the other hand, under a contract of service (employment) it is not uncommon that the client has the right to specify a location for the contractor to provide services.
Control over the times in which a contractor provides services also varies; employees tend to be required to work hours specified by their employer, whereas a self-employed individual is able to provide work in the hours they see befitting of the task and their own convenience. It is acceptable for the client to state the maximum number of hours that are to be spent providing the services per week for budgetary reasons to the contractor, however the allocation of these hours should be left to the contractor’s discretion. A contractor should therefore not be obliged to adhere to the same working times as the client’s own employees.
Control over how the tasks are completed can prove a problem. Contractors with a specialist skillset will most likely provide work for clients that are unable to source such a skillset in house. Therefore, it is important that throughout the duration of the engagement, the client is not able to direct or instruct you about how to undertake the work that you have been engaged to deliver. It should really be a case of the client relying upon the expertise of the contractor during the engagement.
However, the use of control as a status test isn’t always so clear cut. The case of Morren v Swinton Borough Council proved a clear example that the status test of control cannot be the decisive test when dealing with professional workers of a certain level of skill.
In cases where the job role is fulfilled by a professional expert such as an architect, engine driver, or as in Morren v Swinton Borough Council, a consulting engineer, the absence of control and direction proves little help as a status test due to the fact that these workers very rarely are told how to do their jobs by an employer.
It is not unusual that we see contracts entirely silent on the issue of control.
Ideally, we like to see the inclusion of a clause stating that the contractor's company has autonomy over how the services are carried out. Not only this, but it is important to see a lack of any negative wording that would indicate otherwise.
The contractor is able to provide the services in a manner that they see fit
Hours of work are 'agreed upon' between both contractor and end client
As long as the services are complete before the agreed upon deadline, the contractor should be able to manage their own time
Financial risk is one test that HMRC will look at when determining a contractor's IR35 status, although alone is not enough to give a conclusion.
What is the status test of Mutuality of Obligation? Why more attention should be paid to this underrepresented employment status test
Substitution is an IR35 employment test used by HMRC to determine whether a genuine right of substitution exists in a contractor's engagement.
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