HMRC has had mixed results before the Courts on the distinction between employment and self-employment. One of the relevant factors in determining the status is the requirement for personal service. If the element of personal service is lacking there can be no contract of employment – and a right of substitution can therefore be very important because the ability to send somebody else to do the work is inconsistent with an employment relationship. However, the mere inclusion of a right of substitution has often been found inadequate – an example if the right was, in practical terms, unlikely ever to be exercised. Other issues such as the possible need to obtain the clients consent just complicates the position.
The issue recently rose in the context of agency workers and the effect of a right of substitution was analysed closely by the Upper Tribunal in Talentcore v HMRC UK UT 423. The conclusion was that if the worker had complete freedom to arrange for a substitute if he wished, even if did not actually do so, this represented an unfettered right of substitution which was inconsistent with a contract of employment.
I am afraid I have never been convinced by all this. It seems to me that where a genuine right of substitution exists there can be no employment. Even where a right of substitution does not exist the position can be no more than neutral and the relationship needs to be determined on other grounds. For example if I engage a famous pianist to play a piece of music at a concert, he can’t just send somebody else on the grounds that they will both play the same notes. This is not acceptable, but to suggest that the inability to send the substitute makes him my employee is clearly going too far.