Following the Supreme Court’s ruling that an individual who had worked solely for London-based Pimlico Plumbers for six years, was entitled to full workers’ rights despite being VAT-registered and paying self-employed tax, our tax adviser Liz Bridge provides her comments on the case…
“Everyone in Construction has long known that a worker who claims to be self employed may be an NIC and employment rights time bomb waiting to go off.
This is particularly true if many of the contractual terms in the contract he works under are ‘sham’ –if he didn’t turn up for work he would he ever be required to come again, the only substitutes he could send were other workers from the same firm, etc. It is also true that if the worker does not actually ever work for others and works for the same employer for a substantial length of time, any court will have considerable doubt about self employed status.
In the case of Pimlico Plumbers, the worker concerned wore a uniform, drove a company van, and had a contract that referred to wages, gross misconduct and dismissal. He also had a restrictive covenant which restricted him competing in London should the Pimlico engagement contract cease.
If your firm is to be safe you should review your self employed workers at least once a year and you should be truthful to yourself. It is no good being confident that your employment contracts will protect you if you know in your heart that they cover an arrangement that is really employment. Do not think that the challenge will always come from HMRC.
Could your contracts of engagement be seen as artificial if the worker told a court what was actually expected of him and how he was controlled? The challenge for Pimlico Plumbers came from a worker who wanted his rights acknowledged, not from a Government department.
The atmosphere surrounding employment is changing and the courts are supporting ‘employment’ decisions more and more. There is also a major proposal to change the IR35 rules to support more PAYE. This Pimlico Plumbers decision from the Supreme Court only tells us all what we have known for some time: taking on self employed workers is risky unless they are genuinely self employed.
When I say ‘genuinely self employed’ I mean that the worker brings with them any specialist materials needed, or that they pay other workers, or they bring in specialist kit. Beware the man who arrives with his hands in his pockets asking what you want him to do with your materials and your kit. He is your risk area.”
Secretary, Joint Taxation Committee