IR35 at the High Court
Earlier this January at the special commissioners John Bessell, the director of Dragonfly Consulting Limited, was deemed to be within the IR35 legislation, and was ordered to pay additional taxes totalling £99,000.
The special commissioner, Charles Hellier, had concluded that Mr Bessel was ‘part of a team’ of his client. The commissioner surprisingly decided to disregarded issues such as Mr Bessell providing his own equipment and training, working for another client at the same time, and the lack of any holiday and sickness pay. He stated that these factors pointed ‘weakly’ away from deciding if deemed employment applied.
However, together with the Professional Contractors Group (PCG), who will provide the funding, Mr Bessell will be appealing to the High Court over this decision.
The brief facts of the case are that John Bessell was, and still is the sole director and 50% shareholder in Dragonfly Consulting Ltd. The client was the road service group AA and the agency involved was DPP International Ltd.
The assessment period in question relates to three contracts on three separate projects from 2000 to 2003. During this time, Mr Bessell:
- provided his own equipment,
- was subject to low level of direction and control,
- had a right of substitute, albeit restricted, but not unusually so,
- provided his own training
- worked for another client at the same time as working at the AA,
- had no ongoing obligation to the AA
- was not paid for time off due to sickness or holiday pay
However, the key facts highlighted at the special commissioners was that:
- Mr Bessell's pass to enter AA’s building bore a ‘C’ to denote contractor rather than employee,
- He was invited to staff social events and was able to use the onsite canteen,
- At a cost to himself he provided his own special chair due to ongoing back problems,
- When he was unable to work due to his back, he was not paid sick pay,
- At home, he had a designated office at home consisting of office furniture, two laptops, a fax and a scanner,
- The AA did not reimburse him for a course that benefited his contract with them,
- Mr Bessell did not take holidays at crucial times of the project,
- He was not paid when he was on holiday,
- Mr Bessell undertook a small contract for another client while still contracting at AA,
- Mr Bessell’s rates were reduced from £480 to £375 per day, when market rates fell for contractors,
- Witnesses gave a mixed view regarding the right to substitute. Other contractors working at the AA had sent substitutes, but Mr Bessell never did. There was an ambiguity over whether a substitute would have been accepted without approval from the AA. The commissioners found that the AA would not have accepted a substitute without prior approval.
- Mr Bessell was not told how to perform his duties. He was though expected to complete tasks agreed with the team leader. The standard of his work was informally monitored. He attended weekly team meetings.
- The contract between DPP and Dragonfly placed control with Dragonfly. However, the contract from AA rested control with them.
The special commissioner concluded that due to the limited right of substitution and the level of control there was a strong case leaning towards employment, he concluded that ‘Overall I find nothing which points strongly to the conclusion that Mr Bessell would have been in business on his own account’.
From the outcome of this and recent other cases it seems that the Commissioners are looking beyond what is stated in black and white within the contracts, and are examining the working practises and their integration into the clients companies.
According to existing law ‘one would expect Bessell to be found outside of IR35’. If the appeal were rejected, then this would have a significant impact upon the successful defence of IR35, which has been established in many similar cases. A ruling is expected within the next few months.
