In Northern Lights Solutions Ltd v HMRC, a contractor has lost his appeal against a tax bill of £70,000 after the Tribunal ruled the “overarching degree of control” meant he was a “disguised employee”.
While working as a project manager through his personal service company, the contractor was not entitled to holiday or sick pay and was not part of the pension scheme. He did not receive any training beyond health and safety and was not part of the client’s appraisal scheme.
The Judge found, however, that the relationship between the contractor and the end-user client was one of employment. The contractor had a large degree of autonomy in how he completed his work but was subject to monitoring by the client, which placed him under their “overarching control” and put him in the same position as a highly skilled employee.
It was also found that he took no more financial risks that employees on a fixed-term contract, and while a right to substitution existed, in practice it would have been exceptionally difficult to find a suitable substitute the client would have accepted.
This case illustrates the importance a tribunal will place on criteria such as control and the right to provide a substitute when determining IR35 cases.