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A picture of a lost businessman

Contractor’s indecision leads to self-employment


Gareth Phillips worked for an insurance broker between May 2010 and May 2013. During this period, Phillips maintained that he was an employee, but this was disputed by both the broker and HMRC, who found him to be self-employed.

1st Jun 2021
Tax Writer
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City & General Direct (UK) Limited (C&G) is a broker that provides niche bespoke insurance products to the market. As C&G did not have the contacts or experience to identify potential insurers or negotiate the terms of a binder with them, they reached out to Phillips, who had the relevant contacts and experience.

Working relationship

There was no signed written contract between Phillips and C&G, although employment and a contract for services were both, at various times, discussed by the parties.

The working relationship between Phillips and C&G featured the following:

  • Phillips mainly worked from home, at the Lloyd’s building in London or at the offices of the insurers with whom he was negotiating.
  • Phillips did not have a desk allocated for his use in C&G’s office, nor was he given a staff or office handbook.
  • C&G provided Phillips with a laptop and printer, a C&G business card which described him as ‘sales director’; and a C&G credit card with a £500 limit.
  • One binder that was negotiated contained a key man clause, which stated that the agreement only remained in force provided Phillips remained an employee or director of C&G.

No employment contract

Initially, it appeared that both parties intended for Phillips to be engaged as an employee. In August 2010, C&G sent Phillips a payroll form, and correspondence appeared to negotiate an employment contract. However, Phillips did not return a completed payroll form, nor confirm that this was the working arrangement he wanted.

Negotiations then resumed in November and December 2010, during which a number of options were discussed to finalise the working relationship.

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Replies (2)

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By johnjenkins
02nd Jun 2021 10:09

I'm surprised that HMRC tried to use PAYE. Most IFA's and the like are deemed by HMRC to be self-employed.

Thanks (0)
By Justin Bryant
02nd Jun 2021 12:31

The above case is very helpful and shows that self-employment (in non-IR35 cases at least) is readily found even without a contract and even where one party (the alleged employee) was forcefully arguing for employment and also confirms, inter alia, the following:

1) Where a contract exists confirming self-employment and the parties do not contest that contract as being incorrect, then clearly (all else being equal) it will be all the more likely that it will be a contract for services (self-employment) rather than a contract of service (employer/employee) as per the contract.
2) So-called substitution is merely one potential factor to consider and has little if any weight for highly skilled consultants* (this factor was not even considered in the above case).
3) Checklists are to be avoided (especially HMRC’s, which is totally unreliable and is well known for producing wrong employment results, although some firms do market allegedly reliable checklists – while at the same time correctly rubbishing HMRC’s as being totally unreliable**).
4) Mutuality of obligation (condition (i) mentioned in the above case) is one of the key 3 factors to consider and its absence will automatically result in self-employment.

*The lack of any effective right of substitution may be a neutral factor where the worker is highly skilled - see Mitchell and another v HMRC [2011] UKFTT 172 (TC).
** see for example

Furthermore, there was no suggestion in this recent case that BE should be operating PAYE etc. despite the long service of this solicitor acting exclusively for him over a long period:

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