Tribunal sees through double-glazed status

Double glazing

Determining whether a person is employed or self-employed for tax purposes is a tricky area, as Julie Cameron explains.

Status options

Just as we digest reactions to the Taylor review, the First-tier Tribunal case of Malcolm Tomlinson v HMRC (TC05943) reminds us that there are still only two status options for tax: employment and self-employment. Determining which of the two applies remains a tricky area reliant on a case-by-case consideration of a number of indicators.


Tomlinson had traded as a double-glazing salesman for over 35 years for various companies when his newly appointed tax agent advised that he might be an employee in terms of his engagement with Window Centre (Solihull) Ltd (WCSL). The agent attempted to agree the employment status with HMRC, but after two years of indecision, the status inspector issued a determination that Tomlinson was self-employed with regard to WCSL. Tomlinson appealed to the FTT.

The duty in question was National Insurance (NIC), but the decision would equally apply to income tax. The relevant legislation, in the Social Security Contributions and Benefits Act 1992, sets out that a contract for service indicates an employment situation, with everything else being self-employment. No third category of ‘worker’ exists.

Through a glass darkly

Although Tomlinson had worked for WCSL since the early 1990s, there was no written contract between them. Inevitably, there were inconsistencies between both parties’ understanding of these, which made it difficult for the FTT to summarise the terms of engagement.

In particular, the level of control and supervision, an important status indicator, was a main source of disagreement, covering factors such as how formal were the requirements to spend time in the company’s showroom, follow up on all leads allocated by the sales manager, and wear a shirt displaying WCSL’s logo.

Overall, the FTT concluded that whilst WCSL exercised sufficient control to point to a contract of service, in fact control was relatively modest and could “equally be consistent with a contract for services”.

In forming their conclusions, FTT inevitably revisited the well-known badges of trade. They found that Tomlinson had a considerable exposure to financial risk. He was remunerated on commission, which did not preclude employment status, but his only income was that which he generated himself. Moreover, his commission could be clawed back if he made a mistake. This was in keeping with genuine self-employment.

There were a number of tests that were not regarded as strong factors either way, including the provision of a car and mobile phone. The inability to provide a substitute was countered by a lack of exclusivity, Tomlinson being free to offer his services elsewhere. He was presented to the outside world as part and parcel of WCSL, consistent with being an employee, but the FTT found there was no mutuality of obligation, a pre-condition of employment.

Window on workers

Unusually and for reasons not revealed, the appellant sought to be classed as an employee. In his review of modern working practices Taylor mentions the differences between employee/self-employed NICs, and the Chancellor made an attempt to address it in this year’s Budget but was forced to make an immediate U-turn.

However, for years, the lower taxation and NICs for the self-employed have been sufficient financial incentive for self-employed status to be desirable for both engager and engaged.

The downside to the saving of NICs is the now well-visited absence of employee rights. This was considered in the Pimlico Plumbers case, where the Court of Appeal awarded basic workers’ rights to self-employed Gary Smith, whilst not rebranding his status to that of employee.

Although Tomlinson was concerned purely with his status for NICs, employee-type entitlement to benefits was considered in that context. Tomlinson was not eligible for holiday or sick pay, or the pension scheme that WCSL made available to the company’s employees. The FTT considered this of relatively little weight although supportive of self-employment.  

Crystal Maze

The employment tribunal Uber decision, in which drivers were classed as workers, has arguably focused attention away from tax status by the insertion of this third category. In tax law there is still only employment and self-employment, and it is easy to be side-tracked from this stark reality by the plethora of decisions in other cases.

Uber and more recent media reports have raised the profile of the gig economy, zero-hours contracts and bogus self-employment. The Taylor review, with its recommendations on dependent contractor and associated rights, is far from any statutory guidance on tax status.

Meanwhile, tax agents and the self-employed are left grappling with the employment status indicators. Tomlinson has shown us what a perilous endeavour this is.

Clear sight lines needed

Looking at the whole picture, the tribunal acknowledged factors supporting both employment and self-employment. Standing back for a better view, though, they concluded that Tomlinson was “in business on his own account” and dismissed his appeal, so he continued to be treated as self-employed for tax purposes.

This was an interesting journey along the old familiar road of status signposts. In the modern economy, maybe this will soon become a nostalgic trip down memory lane.

About Julie Cameon


Freelance chartered tax adviser and writer focussing on private client and tax adminsitration for individuals, I also volunteer for Bridge the Gap.


Please login or register to join the discussion.

By lme
18th Jul 2017 07:53

Thanks for a considered and clear article

Thanks (0)
19th Jul 2017 10:41

Glad you found it interesting!

Thanks (0)
20th Jul 2017 11:28

There seems to have been some HMRC activity in this area of late. Although probably irrelevant to the reported case recently I was asked to look at a situation where it appeared there was gap in the reporting history of the commissions. The taxpayer tried to explain this away by claiming to be an employee for the period and therefore it was the engager's problem. Signing the the commission schedules and then being paid gross didn't improve his negotiating position! HMRC reckoned he was self employed!
Given the number of years in play and NI only one wonders if it was an NI record problem.

Thanks (0)