Castle Construction Limited v HMRC (2008)

Castle Construction Limited v HMRC (2008)

This case involved the wrongful determination by HMRC that 314 workers were ‘disguised employees’. The Special Commissioners disagreed with their conclusion of employment status and finalised the categorisation of the workers as ‘self-employed’. Consequently, Castle Construction saved roughly £500,000 in additional National Insurance Contributions.

This case placed great emphasis on the autonomy of the contractor. For example, the ability to have flexibility in regards to when and where to work provided significant evidence that the workers were independent contractors. Additionally, the ability to: provide important equipment; invest in training and rectify defective work in your own time, evidenced the workers were in business of their own account. Consequently, the Special Commissioner reinforced the importance of Contractors being masters of their own assignment.

The Special Commissioner also took a reasonable approach when considering the integration of the workers. For example, some workers wore company branded high visibility clothing and had been issued with a site pass. These items are unlikely to have an impact on the employment status of a worker due to the fact clients have a responsibility to look after the workers from a health and safety perspective. It should also be noted that these measures are becoming more common and therefore this reasonable approach should place contractor’s minds at rest.


The Special Commissioner placed great emphasis on one of the fundamental IR35 indicators: control. It was of paramount importance that a contractor had full control over how their services were performed. However, in relation to when and where the services were performed, it was clarified that it would be reasonable for the client to determine this.

Additionally, the Special Commissioner provided guidance on exclusions from company trips, staff social events and “team building” days. It was decided that this reinforced that contractors were not treated similarly to employees. As a result, this arm’s length relationship ensured that they were not integrated within the client’s business.


Mutuality of Obligations (MOO) was clarified in this case by the Special Commissioners: MOO will exist where there is an obligation on the client to provide further work outside the remit of the project. MOO will not be satisfied by simply an obligation for one party to accept work and one party to pay for said work. It is therefore clear that providing an ongoing service is employment like.

In conclusion, the contractors in this case did not have to provide a notice period to terminate the assignment. Therefore, there wasn’t an expectation or obligation for further work to be accepted. Additionally, the contractors had autonomy in regards to when they would provide their services and they would only be paid upon the completion of work.