This Content Was Last Updated on February 21, 2013 by


The Supreme Court has handed down its judgment in the Autoclenz Ltd employment tribunal hearing. It is a significant judgement which will doubtless have implications for years to come.

Autoclenz engaged car valeters on a self-employed basis. The contracts contained the requisite mutuality of obligations and substitution clauses. The individual workers argued that the clauses did not reflect the actual agreement between the parties and that they were obliged to provide the services personally. The highest court in the land agreed 100% with the workers and found that the substitution and mutuality clauses were not a true reflection of the agreement. The Supreme Court also suggested that the conduct of the parties may be such that it overrides the written terms agreed between the parties. Whether this judgement will be exploited by HMRC in its own employment status tests remains to be seen.

Does it impact on IR35? The answer is no.

The case above is an employment tribunal decision only, and does not deflect from previous IR35 test cases, notably the recent ECR Consulting Ltd case, which was a resounding victory for the taxpayer. The judgement in the Autoclenz case rested on the failure of the written contract, whereas in the ECR Consulting case the opposite applied, and remember this was a IR35 tax case, far more relevant than an employment tribunal ruling, even if it was handed down by the Supreme Court.

In the ECR consulting case it was judged that, where the parties have entered into formal contracts, the terms of those contracts have to be imported into the hypothetical agreement between the worker and the client, a welcome step forward that negates significantly HMRC’s approach of constructing a hypothetical contract which is slanted in favour of IR35 applying.

Our advice as always is to keep your guard up, and protect your IR35 status by ensuring that a)your contract is IR35 compliant and b)working practices, both you and your client, reflect the written contract, and lastly keep up to date tax enquiry insurance, be it through us, PCG or elsewhere. Do not underestimate the cost of defending an IR35 challenge, even if you win!