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HMRC internal manual

Employment Status Manual

Considering the evidence: ineffective or sham substitution clauses

Many contracts contain clauses that appear to give a right of substitution. It seems likely that many of these clauses have only been inserted to try and break the requirement for personal service and change the contract from one of service to one for services. Normally a client requires the services of a particular worker and a substitute would not be acceptable so there must be doubts about the validity of such clauses.

Where a contract contains a substitution clause you may need to ensure that there is a genuine right. You should only accept that such a right exists where there is an explicit right for a substitute to be sent and that this right has been accepted by the client. A service company/agency contract may contain a genuine right but this clause may be cut down by what the client says. Their agreement would be with the agency and, although such a right may be given to that agency, it would not necessarily be given by the client to the service company or, more importantly, to the worker.

You should not accept that a right of substitution exists just because the contract is in the name of the service company. A right of substitution is only likely to exist where the client does not care from one day to the next for the duration of the contract who turns up to carry out the work, provided that whoever does so is suitably qualified and experienced.

Similarly you should not accept that a right of substitution exists where an unlimited fetter is placed on the worker’s or intermediary’s right. A requirement for the client to approve the proposed substitute in advance is not necessarily an unlimited fetter. An unlimited fetter reserved to the engager would basically be one in which he could just refuse a substitute for any reason.

However, the fact that a substitution clause is ineffective or a sham is merely an indicator that personal service is required. At best this would, as stated above, only be considered to be a minor pointer to employment.