Tilbury IR35 decision published and analysed

As I reported here:

Tilbury decision analysis

The Tilbury Consulting IR35 appeal was successful at the Special Commissioners.

The Special Commissioners have now published the decision on their web site. The bulk of the decision is taken up with a summary of the main facts.

The actual decision is very brief – so brief that I am copying it here:

Conclusion

27. The findings of fact set out above, which identify the arrangements involving the intermediary (TCL), the circumstances in the context of which the arrangements were made and the nature of the services performed by Mr Tilbury, show that Mr Tilbury would not have been regarded as Ford's employee (making the statutory assumption that he was contracted to perform services to Ford). The facts show that CW and not Ford had operational control of the AMC project. Ford had engaged CW to provide its IT services and to set up and operate the AMC project. CW was engaged as principal and acted personally in the project. It equipped itself with its own specialized personnel to discharge its own obligation to Ford, either by employing them directly or by engaging outside subcontractors, such as TCL which in turn provided Mr Tilbury. Ford did not exercise control over the manner in which the CW personnel carried out their duties. To the extent that control was exercisable over the performance of Mr Tilbury's services, that lay with CW. Ford accepted suitable substitutes from CW and CW was obliged to accept from TCL a suitable substitute to Mr Tilbury. At no time was Mr Tilbury a part of Ford's business or undertaking. Those facts are inconsistent with an employer/employee relationship between Ford and Mr Tilbury.

28. The findings of fact and the application of the statutory assumption to those findings do not support the decision appealed against. I therefore allow the appeal.

Implications of the case?

The brevity and lack of analysis of the key status issues that have been established by case law over many years suggests that the Special Commissioner, Stephen Oliver QC focussed mainly on the fact that it was the agency Compuware (CW) that controlled the IT centre where Tilbury Consulting was engaged to provide the services of Roger Tilbury. As became apparent at the hearing the Revenue had clearly failed to comprehend until very late in the day that CW were not acting just in the traditional agency role but had actually contracted to manage Ford's IT centre. Clearly under that arrangement it was going to be very difficult to demonstrate that, under the arrangements to be considered, Tilbury would have been an employee of Ford had his intermediary been ignored.

Quite how this case will affect IR35 cases in future is not so certain. The key issue was the role of CW and the Revenue's failure to claim CW as the disguised employer rather than Ford. Had they done so then many of the issues relating to Ford's lack of control over the worker, Roger Tilbury, would have been very different. Hence for many freelancers it is unlikely that this particular set of circumstances will apply in their case.

Issues that remain pertinent include the right of substitution that existed in Tilbury's contract with CW. Although this was never exercised and was qualified to the extent that any substitute had to be "suitably qualified" and that CW had thirty days in which to reject the substitute the right had been especially negotiated by Tilbury and the Special Commissioner clearly accepted that the right of substitution was valid.

Other facts that the Commissioner cites in the decision and which were clearly considered to be pertinent were:

· The provision of a home office where occasional work on the contract was carried out

· Although Tilbury was required to carry out most of his work at the Ford offices this was clearly necessitated by the need to have access to the Ford mainframe computer.

· Contractors working at Ford had different colour passes and had restricted access to Ford's facilities – for example they could not use the company's staff gymnasium.

Clearly this case is also helpful as regards length of contract. The decision suggests, by the mere fact that it does not discuss the issue at all – other than mentioning it as one of the background facts – that mere length of contract is not a key issue in itself. However we need to bear in mind that this case's circumstances were rather unique and more might have been made of the length of contract issue had the deemed client been the agency not the end client.

Overall the case will rightly serve as an encouragement to all freelancers. However, unlike some other commentators I think this falls short of being the case that 'kills' IR35. It shows the value of identifying all the factors that distinguish a freelancer from a temporary or disguised worker. It shows that a right of substitution is a key issue whether it is used or not. It shows once again that the Revenue is fallible and freelancers who stick to their guns can beat even the most intransigent Inspector. Finally it confirms yet again the value of engaging an expert to assist in dealing with the Revenue. Tilbury was fortunate in having the PCG fund his case. Most freelancers, however, will need to arrange their own 'safety net' by taking out suitable insurance to ensure they can afford such support.