Now we know what to test, we need to find out what to test against, the criteria on which we will base our test.
Once again we can turn to case law for this and we find that the leading case, accepted over and over again in status cases is Ready Mixed Concrete V Minister of Pension 1968.
This case is fully described in HMRC website in their manual ESM7030 but Judge McKenna's decision can be quoted exactly to see how to identify an engagement that is one of employment:-
"A contract of service exists if these three conditions are fulfilled.
(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master.
(iii) The other provisions of the contract are consistent with its being a contract of service."
These three items have become known as the "irreducible minimum of three" factors that need to be present for employment to exist, and they can be summarized as:-
- Personal Service
- Control
- Mutuality Of Obligation
The important point is that an employment contract will exist where all three factors are present, and therefore no employment contract can exist where ONE of these factors is not present.
To summarise, for a contract to be outside IR35 you will need to demonstrate at the three levels of the test that one of the irreducible minimum of three is missing.