Novasoft Limited v HMRC (2010)

Paint an overall picture, then stand back and view it.

In the main, when a contract for service does not contain a valid right of substitution this would usually be seen by most as that fatal blow for the contractor in determining their independence from the end client. In this case however, the Tribunal stated that although a right of substitution would generally be inconsistent with a contract of employment; its absence does not point definitely to such a contract.

The Tribunal felt that in the particular situation of Novasoft and taking the picture as a whole that the detail concerning substitution did not disturb the overall impression they formed of the theoretical contract, i.e. one of self-employment.

Of further interest was the Tribunal’s reference to the words of Mummery J in the case of Hall v Lorimer (1992):

"The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole.>

It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The process involves painting a picture in each individual case.”

This means that it is important to paint a picture of self-employment from the accumulation of detail in each individual case as opposed to relying one or two employment status indicators.



Mr Brajkovic, on behalf of Novasoft Limited, won his appeal on the fact that he was not part and parcel of Avecia's organisation. This illustrates that each case depends on its own facts and that the outcome in any individual case is very difficult to predict.

Let’s just hope that more Tribunal’s will be aligned to looking at the facts of each case and the overall picture, instead of just cherry picking one or two bad points from a list of employment status indicators and relying on them to decide cases.

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