Revenue and Customs v Wright

Whether workers are employees depends on whether they work under a contract of service with the alleged employer. The law does not require a rigid choice between employment and self-employment. Where workers are engaged for particular assignments, the decisive issue may be the alleged employer’s real day-to-day power to control what they do and how they do it. Selection of workers, transport to the workplace and initial instructions do not necessarily establish that control. Instructions from a customer’s site foreman are not ordinarily control exercised by the labour provider, unless the foreman is acting as the provider’s agent. An absence of guaranteed work or payment may bear on an umbrella contract between assignments, but does not determine whether the workers are employees while actually working.

The Commissioners for Her Majesty’s Revenue and Customs assessed Philip John Wright under regulation 49 of the Income Tax Employment Regulations 1993 and section 8 of the Social Security Transfer of Functions Act 1999. The General Commissioners allowed Mr Wright’s appeal, finding that the workers he supplied to main contractors were self-employed under contracts for services. They relied on the oral nature of the engagements, the absence of a formal contract protecting the workers, and payment only for work done.

The Revenue appealed by way of case stated. The central issue was whether the workers were employed by Mr Wright under contracts of service during the periods when they were working on the contractors’ sites.

1. Appeal allowed and question remitted. The General Commissioners applied the wrong legal test. The question was not whether the workers were employees or self-employed in the abstract, but whether they were employed by Mr Wright under contracts of service.
2. There is no rigid dichotomy between a contract of employment and self-employment. As explained in Dacas v Brook Street Bureau [2003] IRLR 190, a person is not an employee merely because he or she is not carrying on business independently. The same point was endorsed in Bunce v Postworth Limited [2005] IRLR 557 and reflected in Montgomery v Johnson Underwood Limited [2001] ICR 819.
3. Section 230 of the Employment Rights Act confirms that a contract of employment may be express or implied, and oral or written. The oral nature of the engagements and the absence of a formal written contract were therefore irrelevant.
4. The lack of any minimum payment irrespective of demand or weather might be relevant to whether an umbrella or overarching agreement governed periods when the workers were not working. It did not determine whether they were employees during periods of actual work.
5. The essential issue was whether Mr Wright had sufficient day-to-day control over the workers. The Commissioners’ findings showed that the site foremen, appointed by the main contractors, determined working hours and gave precise on-site instructions. Selection of workers, transport to the site and initial instructions did not by themselves establish control over the work.
6. Global Plant Limited v Secretary of State for Health and Social Security [1971] 3 All ER 385 was a decision on its facts, dependent on the site foreman being treated as the employer’s agent. It laid down no general principle that instructions from a customer’s site foreman amount to control by the labour provider. The approach in Bunce v Postworth Limited [2005] IRLR 557 showed that the relevant question is who in reality had the power to control the worker.
7. The facts did not compel the conclusion that the workers were Mr Wright’s employees. The issue remained one for the General Commissioners, who had to reconsider it by applying the correct legal test.

1. High Court (Chancery Division): The appeal by way of case stated was allowed. The issue was remitted to the General Commissioners for determination under the correct legal test.
2. General Commissioners for Income Tax: On 6 September 2005, the Commissioners allowed Mr Wright’s appeal against the Revenue assessments.