There has always been an argument that if you are genuinely in business on your own account you are not providing personal services and therefore fall out of scope of the legislation. Even if this view is not held by HMRC, the courts undoubtedly look at someone who is ‘in business’ differently to how they look at an employed person.
ECR Consulting v HMRC
In the ECR Consulting v. HMRC (February 2011) case the Judge stated that “It is clear to us that ECR is a genuine business. The evidence put forward by the appellant was that ECR had business cards and stationery, advertised the services, and had a website”.
Although HMRC also lost the case on the core status tests, the business structure was carefully considered by the Judge. It is therefore prudent for all genuine businesses to consider their set-up to ensure that it evidenced the facts.
JLJ Services Limited v HMRC
In JLJ Services Limited v HMRC (2011) the Judge felt that Mr Spencer could be considered to have been conducting his own business in his early days of contracting, as clients wanted him for a project, but then had no continuing role for him. Therefore he was exploiting a specific skill that he had, for which different organisations had short-term demands. He did take the risk that there could be significant periods during which he would have no work and indeed there were five periods totalling 40 months without work.