Written contracts for services are not worth the paper they are wriiten on?
Following the recent Supreme Court Judgement in Autoclenz Ltd v Bellcher and others ( 27/07/2011 ) now is a time to be careful and review your working relationships and wriitten contracts. The Supreme Court has affirmed that, where a party asserts that a wriitten term does not reflect the reality of the agreement, tribunals and courts may seek to look outside the terms to determine the true nature of the agreement. This case is not a tax case but it has obvious tax implications and it is a reminder that the wording in a contract may be ignored if it is deemed not to fit with reality.
Background to the case
Mr Belcher and 19 other individuals provided car-valeting services for Autoclenz Ltd. Contracts drawn up referred throughout as them being ‘ subcontractors’ and clauses were included for substitution and stated that it was not obliged to provide work for the individuals and they were not required to do the work offered. The Court of Appeal ruled and the Supreme Court agreed that ‘ the elaborate protestations in the contractual documents that the men were self-employed were odd in themselves and, when examined, bore no practical relation to the reality of the relationship’. The individuals were therefore able to claim that they were working under a contract of employment so that they could benefit from the National Mininmum Wage and holidays etc included in the Working Time Regulations. Please follow the link for the full ruling. http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKSC/2011/41.html
A&C Chartered Accountants believe that HM Revenue and Customs may use this decision in Employment Status Cases and would urge readers to carefully consider their existing contracts and whether these do reflect the actual working practices. Please call us to discuss further.