If there is no contractual obligation for personal service in the contract between the Limited Company and the staffing company, and the actual working arrangements are consistent with this contract then the contract is outside IR35.
In the Ready Mixed Concrete case Judge Mckenna said:-
"freedom to do a job either by one's own hands or another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be"
And in the later case of Express Echo V Tanton 1999 Lord Peter Justice said:-
"it is in my judgment, established on the authorities that where, as here, a person who works for another is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer"
Because of this, many people focus on the subject of substitution, but this is just part of the story.
For a contract not to have a right of personal service then there could be various clauses that would demonstrate this:-
- The right of the company to send a substitute for a named worker on the contract, this right not to be unreasonably fettered.
- The right of the company to subcontract the fulfilment of the contract to another party. ( This is different to assignment of the contract )
- The right of the company to supply services of any of its employees at any time and to hire helpers to fulfil the engagement.
It is important to remember that it is the rights on the contract that are important here, not whether those rights are exercised.
In recent case law it has been demonstrated that the rights under the contracts must be practical, they must be reasonable for the circumstances, and any clauses that are a sham will be looked through and disregarded.
For instance if you are relying on a clause in your contract that says you can supply any employee, but in reality you are a one person Limited Company, then this clause will not be practical and a court/tribunal would be more than likely to disregard it.
HMRC also give useful advice on disproving a right of substitution at ESM0537 although they start by saying:-
Disproving a claimed right of substitution can be difficult.
Unless there is reason to doubt a claimed right of substitution it may normally be accepted at face value.
So if you are relying on the right not to have personal service on a contract then you should make sure, as far as you can, that the clauses in your contract that you are relying on are not in contradiction with any clauses in the contract between the staffing company and the end client.
You could do this by writing to the staffing company asking them to confirm that this is the case; this is more practical than asking them for a copy of the contract which they are unlikely to give.
A second level of this is that you could write to the end client advising them of your understanding of the nature of your arrangements, and asking them to confirm that this is also their understanding of the arrangements.
If you are seeking to use the lack of personal service in your contract as proof that your contract is outside IR35 you should seek confirmation of the nature of the arrangements from both you staffing company and end client, and you should keep this proof available.