On 6 April 2021 and after several false starts, chapter 10 of the Income Tax (Earnings and Pensions) Act 2003 (commonly known as the "Off Payroll rules") came into force. This aligned the private sector to the same rules already governing the public sector in the recruitment of external consultants through an intermediary.

Under the Off Payroll rules, the client (often referred to as the "end user") is legally responsible for determining the tax status of the consultant and providing a Status Determination Statement prior to the consultant's engagement through their intermediary. If the consultant has deemed employment status, it is usually also the client's responsibility to account for the tax from any fees paid to the intermediary (unless another party is deemed to be the fee payer.)

The Off Payroll rules pertain only to the tax status of consultants and any dispute with HMRC regarding a consultant's status is a matter for determination by the First or Upper tier of the tax tribunal in the first instance. However, the factors considered are the same as those contemplated by the employment tribunal when determining whether a person is self-employed, a worker, or an employee (although the tax tribunal can only decide that someone is employed or self-employed for tax purposes).

The factors looked at by both the tax and employment tribunals are:

  • the level of control that the client has over the consultant
  • the mutuality of obligation between the parties
  • whether the consultant is required to personally provide the services.

Over the years a plethora of case law has been established to examine these factors and consequentially, this area of law can often seem paradoxical and confusing. It is also constantly evolving, hence it is necessary to be alert to any changes in the law.

Reviewing the Off Payroll working rules

Since the Off Payroll rules have come into effect a number of cases have considered worker status, particularly in the context of mutuality of obligation. For example:

Professional Games Match Officials Ltd v HMRC

The Court of Appeal agreed that there was insufficient mutuality of obligation between the client and referees (who were free to decide whether to referee each game or not, without any repercussions) to establish worker status.

However the Court did consider that, on each occasion that the referees performed those services, this could give rise to a series of separate employment contracts being created. The Court of Appeal remitted the case back to the First Tier tribunal for consideration of this issue and its decision has not yet been published.

Nursing and Midwifery Council v Somerville

Mr Somerville was appointed by the Nursing and Midwifery Council as a member and chair of its Fitness to Practise Committee. The Council was not obliged to request Mr Somerville's services and if it did so, he was under no obligation to accept.

The Court of Appeal considered that, while there was insufficient mutuality of obligation to establish an overarching worker relationship, each time that Mr Somerville delivered the services, an individual contract was created. Under that contract he was required to deliver the services personally, and as such the Court held that there was no "irreducible minimum of obligation" required to establish worker status. Mr Somerville was therefore found to be a worker for the purpose of asserting a claim under the Working Time Regulations.


The introduction of the Off Payroll rules has certainly not come without criticism, and on 9 February 2022 the House of Lords Economic Affairs Finance Bill Sub-Committee wrote to the Government to note its observations on the impact of the rules on the private sector.

They include the limited nature of the Government's online CEST tool when trying to establish certainty regarding a person's status, and the increase in "rogue umbrella companies" that have emerged over the last 12 months, which the Committee stated to be a particular risk to vulnerable workers. The Committee did not, however, specify what it meant by "rogue" or explain what companies are doing that may exploit workers.

The Committee also noted that the dual nature of the two tribunal systems means that a person can still be deemed to be an employee for tax purposes, while self-employed in the eyes of the employment tribunal (or vice versa), which is far from ideal.

The above cases also indicate an increased willingness on the part of the judiciary to find that, even if there is insufficient mutuality of obligation to establish an overarching employment relationship, this will not stop the court from examining the nature of each separate engagement, to see whether the factors have been satisfied on each of those occasions to create a number of individual employment engagements.

This is quite a significant deviation from the way cases have been assessed previously and will mean that many organisations, which felt they had finally understood the Off Payroll rules, will once again be navigating uncharted territory.