<p data-pm-slice="1 1 []">IR35 applies to prevent disguised employment in situations where individuals provide their services through a personal service company. The end-user or agency is the deemed employer and has responsibility for deducting income tax and employee NICs. The deemed employer must also pay employer NICs directly to HMRC, but this cost cannot be passed on to a worker.</p>
Ms Appiah contracted via her personal service company with Tripod Partners Ltd, a social care recruitment agency, to work for the Home Office as an independent social worker. On the basis of HMRC’s Check Employment Status for Tax (CEST) tool, the Home Office concluded that Ms Appiah fell inside IR35 and that she should therefore be taxed as an employee. Tripod made deductions from Ms Appiah’s pay for income tax and employee NICs. However, it also made deductions for the employer’s NICs totalling over £36,000.

Ms Appiah brought a claim in the Employment Tribunal alleging that deducting employer NICs from her earnings was unlawful. Tripod defended this claim on the basis that Ms Appiah was not eligible to bring an unlawful deductions claim because she was not a worker and that, in any event, its contractual arrangements with her personal service company justified those deductions.

The Tribunal upheld Ms Appiah’s claim, concluding that despite the contractual arrangements, she was a worker and not an independent contractor. The reality of her working arrangements pointed towards worker status. For example, she performed work personally, worked full-time, submitted timesheets rather than invoices, and was subject to the direction and supervision of the Home Office. It was also clear that Ms Appiah was not genuinely running her own business. In addition, there was no provision in the contractual documents allowing employer NICs to be deducted from her pay.

This case is not binding on other Tribunals, but may be appealed. However, it illustrates that an individual working through a personal service company may be found to have worker status, meaning that they could be entitled to additional rights such as holiday pay, national minimum wage and statutory protection from unlawful deductions from wages. In this case, the contract stated that the individual was not a worker, but this was not reflected in the reality of her working arrangements. This highlights the importance of assessing practicalities as well as contractual provisions in order to minimise the risks of legal action on employment status.