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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Case law: Future Online Ltd v Foulds


Point at issue

Whether the Social Security Contributions (Intermediaries) Regulations 2000 and Schedule 12 FA 2000 applied to the provision of services by an IT consultant working through his own service company.


Appeals had been made to the Special Commissioners against regulation 49 determinations and S.8 NICs decisions for the years ended 5 April 2001 and 5 April 2002. The determinations/ decisions had been made under the ‘IR35’ legislation on the basis that had Mr Roberts, director of Future Online Ltd, provided his services directly under a contract with the client company EDS, he would have been regarded as an employee of that company/employed in employed earner’s employment by that company. Future Online Ltd had not contracted directly with EDS for the provision of Mr Roberts’s services but had done so through an agency, Elan Computing Ltd (“Elan”).

The Special Commissioner had dismissed the appeals.


In the appeal to the High Court, the appellant made two lines of attack on the Special Commissioner’s decision.

Firstly, that for the purposes of the legislation Elan was the client and not EDS. It was submitted that it was wrong to regard EDS as the client as all that one is directed by the paragraph to ignore, for the para. 1(1)(c) test in FA00/SCH12, is the contract between the worker and the intermediary. Future Online Ltd’s client is Elan and Mr Roberts provided his services for its business. Alternatively, the legislation was ambiguous and under the Pepper v Hart doctrine, it is necessary to look at the parliamentary proceedings in Hansard to ascertain the true intent of the legislature. Further, if Schedule 12 allows the possibility of there being more than one client, this permits the Revenue to choose which of the two should be the relevant client and that the principle established in the case of Vestey v IRC [1980] AC 1148 should apply.

Secondly, it was argued that the Special Commissioner had wrongly accepted that it was the right of control of the worker by the client that was significant rather than whether control was actually exercised. And that he had placed too much emphasis on the ‘part and parcel of the organisation’ test using it as an overall test.


In the High Court, Sir Donald Rattee rejected all the appellant’s arguments.

He found that the only person for the purposes of whose business it could realistically be said that Mr Roberts was performing services was EDS. Even if he were wrong in that respect and both EDS and Elan could be regarded as clients one would have to see whether the para. 1(1)(c) test was met in respect of either of them. The judge also rejected the Pepper v Hart argument because he was not satisfied that there is any ambiguity or obscurity in the meaning of the legislation. Accepting the Revenue’s submissions, he considered that the principle expressed in the Vestey case had no relevance to the argument in this case. On the facts as found by the Special Commissioner, even if Elan could be treated as the client, the para. 1(1)(c) test would not then be satisfied.

A further contention made by Counsel for the appellant was that, by treating EDS as the client, the liability to the Revenue would depend on facts not within the knowledge of Future Online Ltd. The judge rejected this argument for the same reasons as those given at paras. 43 to 47 of the judgment by Park J. in the case of Usetech Ltd v Young.

In deciding whether Mr Roberts would have worked for EDS under a contract of service, the judge found that the Special Commissioner had correctly taken account not only of the terms of the contractual arrangements but of all the other circumstances in which Mr Roberts performed his services for the purposes of EDS’s business. He therefore found the criticism of the appellants in relation to the matter of control quite unfounded.

Finally, the judge considered that it was clear that the Special Commissioner was not treating the part and parcel of the organisation feature of the circumstances of the case as a test of employment in its own right but only as one of the features pointing to a contract of service. The Special Commissioner had found as fact that Mr Roberts was an integral part of the EDS organisation rather than just being part of a team working on a project.

The appeals were dismissed and the judgment is now final.


The judgment confirms the Revenue’s views on the identity of “the client”. It is also useful in confirming that, if an individual is found to be ‘part and parcel of an organisation’, this is a pointer to employment following the comments of Mummery J. in the case of Hall v Lorimer.