Castle Construction Limited v HMRC (2008)

This concerned 314 workers all found to be self-employed in one case.

The Special Commissioners took a “back to basics” approach when hearing the case of Castle Construction (Chesterfield) limited this month. The Special Commissioners decided that HMRC had got it wrong in claiming that 314 workers were actually disguised employees of Castle Construction. In doing so, it saved Castle Construction from £500,000 in additional National Insurance Contributions alone.

In a case where HMRC sought payment from the end client, Castle Construction, and not the workers (because they were not working through their own limited companies), the decision will provide some festive cheer for all Contractors, especially those in the construction industry.

The Special Commissioners’ decision also re-affirms the need for Contractors to be masters of their own assignment. Deciding when and where to work, providing your own equipment (not just a few hand tools) and investing in training, along with rectifying defective work in your own time, are all excellent ways of demonstrating that you are an independent contractor.

End clients who require all workers to wear high visibility vests for health and safety purposes, are unlikely to change the employment status of the worker just because it bears their company logo. Nor will issuing a site pass for security purposes. Both of these are becoming more and more common as clients look to secure their property and provide a safe working environment for anyone on their sites. So contractors should take some comfort that the Special Commissioners will take a common sense approach when looking at these issues.


Dealing with the sensitive subject of control, the Special Commissioners decided that it would be reasonable for an end client to dictate when and where the work was to be provided. However, when it came down to how the job was to be completed, it was imperative that the contractor took complete control of this.

Being excluded from company trips, Christmas parties and “team building” activities will also help contractors to demonstrate they are not integrated into the client’s business. All are important factors to be considered when determining whether you are treated as an employee or an independent contractor.

Mutuality of Obligation

The Special Commissioners also provided some guidance as to how to approach the thorny issue of “mutuality of obligation”. The Special Commissioners stated that there must be more than just an obligation on one party to work and the other to pay. Where there is an obligation on the client to provide further work beyond the current project, this will point towards an employment relationship. In this case, Castle Construction did not require any period of notice from the contractors to terminate their assignment, the working times were also entirely flexible, both in reality as well as in theory, and the contractors were only paid when they in fact worked. All these items are features that are inconsistent with any normal employment contract.

This case serves to be a useful reminder of the fundamental principles surrounding IR35 and employment status and also provides comfort to know that the common sense approach remains the best approach.

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