Contract of self-employment upheld in boost for IR35 compliance

Contract of self-employment upheld in boost for IR35 compliance.

Hudson Contract has welcomed the decision of an employment tribunal to dismiss “opportunistic” claims made by a self-employed heating surveyor.

The company said the judgment protects the important economic role of legitimate freelancers and preserves the ability of small and medium-sized businesses to access their specialist labour in a mutually beneficial way.

The claimant, Mrs W Lynch, was represented by Jacqueline McGuigan of TMP Solicitors, whose previous cases includes the successful Court of Appeal case against Pimlico Plumbers in 2017, which put a spotlight on the business model of the so-called “gig economy”.

The respondent was Help-Link UK, a Leeds-based national supplier and installer of domestic heating systems.

In its judgment, the tribunal described Mrs Lynch as an “accomplished, mature individual and effective communicator; not averse to asking or dealing with difficult questions”.

The judgment said she voluntarily agreed to adopt self-employed status with Hudson in 2011 and direct with Help-Link in 2015 and signed agreements with clear references to self-employment and freelance status.

The judgment said Mrs Lynch had both read and understood the terms of her 2011 agreement, made with Hudson Contract, which entered her into the HMRC-approved Construction Industry Scheme (CIS) for contractors. In representations to HMRC, Mrs Lynch declared her self-employed status, the judgment added.

The tribunal heard that Mrs Lynch was paid on a commission-only basis with rewards significantly in excess of those paid to employed surveyor colleagues. The tribunal also heard she was able to decline appointments, was not subject to any form of supervision, control or performance review from either Hudson or Help-Link and was entitled to send another person to carry out her services.

Help-Link terminated the relationship in January 2018, according to the tribunal.

Mrs Lynch went on to claim unfair dismissal, wrongful dismissal and unlawful deduction of wages relative to holiday pay.

The judgment rejected her evidence in which she denied any knowledge or appreciation of the terms she agreed. It also raised inconsistencies in her filed financial statements to HMRC.

The judgment added: “Hudson was providing access to the CIS arrangement for the benefit of the both the claimant and the respondent. This is not therefore a situation in which a corporate entity has been interposed between a putative worker and employer, in order to evade the legal consequences likely to arise upon a true classification of their underlying relationship.”

The judgment said Mrs Lynch’s 2015 direct agreement with Help-Link which was administered by Hudson preserved her much cherished flexibility and autonomy, together with continued access to enhanced rights of commission.

It said the agreement was not capable of conferring employment or worker status and dismissed Mrs Lynch’s claims on the grounds they lacked legal capacity.

Speaking after the judgment was issued, Ian Anfield, who gave evidence as managing director of Hudson Contract, said: “Opportunistic employment claims risk undermining the important economic role played by legitimate freelancers.

“Our extensive research shows that freelancers enable competition, entrepreneurship, the use of specialised labour, more efficient allocation of risk and the reduction of excess production capacity.

“We are delighted the tribunal upheld both our CIS and Freelance contracts, giving confidence to UK businesses that if done properly, they can continue to benefit from specialist contractors following the introduction of new tax legislation such as the proposed changes to IR35 due in April next year.”