Hall v Lorimer

The distinction between a contract of service and a contract for services depends on the overall picture created by all the relevant circumstances. The inquiry is not a mechanical checklist in which factors are counted or given fixed weight. The court must assess the accumulated detail and stand back to evaluate its qualitative effect.

Control remains relevant but is not decisive. Other considerations may include equipment, helpers, financial risk, investment, management, profit opportunity, engagement duration and dependence on a particular paymaster. Short or casual engagements and highly skilled professional work may still amount to employment.

The Inland Revenue appealed against Mummery J’s dismissal of its appeal from a Special Commissioner. The Special Commissioner had allowed Ian Lorimer’s appeal against assessments under Case 1 of Schedule E on earnings from freelance vision-mixing engagements between 1984/85 and 1988/89.

The agreed issue was whether the relevant contracts were contracts of service. If so, the earnings were assessable under Schedule E; otherwise they were assessable under Schedule D as profits from a trade, profession or vocation.

1. Appeal dismissed. Nolan LJ delivered the leading judgment, with Dillon LJ and Roch LJ agreeing. The respondent was awarded costs.
2. The Special Commissioner’s conclusion was one of mixed law and fact. It could be disturbed only for a misdirection in law or where the only reasonable conclusion on the facts found was inconsistent with the determination.
3. The proper inquiry was whether, viewed in the round, the taxpayer was in business on his own account. This required a qualitative assessment of the accumulated detail, rather than a mechanical checklist. The factors did not have fixed or equal weight.
4. The indicia identified in Market Investigations Ltd v Minister of Social Security (1969) 2 QB 173 remained useful. They included control, equipment, helpers, financial risk, responsibility for investment and management, and opportunity for profit. The inquiry could also take account of the duration and pattern of engagements, the number of paymasters and dependence on one paymaster.
5. The highly skilled nature of the work and the short or casual nature of the engagements were not decisive. The taxpayer’s work for about 20 or more production companies, predominantly on one-day engagements, exposure to bad debts, substantial business expenditure and opportunity to profit from his reputation supported the conclusion that he was working as an independent contractor. The absence of his own equipment or staff did not compel the opposite result.
6. The court approved the relevant approach in Fall v Hitchen (1973) 1 WLR 286, treated Lee Ting Sang v Chung Chi-Keung (1990) 2 AC 374 as fact-sensitive, and found no material error in the Commissioner’s treatment of Davis v Braithwaite (1931) 2 KB 628 or O’Kelly v Trust House Forte PLC (1984) QB 90. The concession concerning six engagements performed by substitutes did not affect the remaining engagements.

• Court of Appeal: dismissed the Revenue’s appeal and granted the respondent’s application for costs.
• High Court, Chancery Division: Mummery J dismissed the Revenue’s appeal from the Special Commissioner’s decision, reported at (1992) 1 WLR 939.
• Special Commissioner: allowed Mr Lorimer’s appeal against the Schedule E assessments and held that the earnings were assessable under Schedule D.