Ansell Computer Services Ltd v Richardson (HMIT), Special Commissioners, 29 July 2004

Where does NI liability fall? Ansell, a software engineer, worked for clients on special defence projects under contracts that provided his services via Ansell Computer Services (ACSL), an intermediary company formed by him. The contracts were for an unlimited period, to be terminated by breach or mutual consent and provided for an expected maximum number of hours at an hourly rate.

If the arrangements were for the provision of services, the IR35 legislation would not apply; if there was in effect an employment relationship, ACSL would be liable for National Insurance contributions (NIC) in respect of the payments made by the clients for Ansell’s work.

ACSL was held liable for NIC but appealed successfully to the Special Commissioner, arguing that Ansell should not be regarded as an employee. ACSL was not liable for NICs in respect of payments made by the clients. The absence of any obligation on the clients to keep Ansell in work throughout the period of engagement; the fact Ansell did not have to put in a particular amount of work; his ability to take time off when he chose and to withdraw and suggest a substitute; and the absence of mutuality of obligation in the fact that the clients believed that they could terminate Ansell’s activities at virtually no notice were all factors that led to the conclusion that Ansell would not have been an employee as required by the IR35 legislation.

The contractor relationship was seen by Ansell and the clients as being significantly different from employment. It had commercial advantages that were perceived by them to outweigh the disadvantages. The Special Commissioner was satisfied that the arrangements were entirely bona fide and were not designed to disguise or re-label what in reality would be thought of as employment.

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