A self-employed contractor enters into a contract to provide a service rather than personal skills and should be able to provide a substitute or engage a helper to provide the service. An employee on the other hand, would have to provide their services personally.
The right of substitution has been considered one of the strongest tests of self-employment since the case of Chaplin v Australian Mutual Provident (1978) which held that “…the power of unlimited delegation is almost conclusive against the contract being a contract of service.” This was upheld in the case of Echo and Express Publications v Tanton (1999).
Many contractors will argue that they never need to engage a substitute, perhaps because they never need one or because they do not know other contractors with the relevant skills to appoint, even if the need arose. Regardless if this is the case, HMRC will look to draw a ‘hypothetical contract’ and so it is vital that although the majority of contractors may never exercise it, the right to substitute someone else to undertake the work must be a genuine one. The substitute must be answerable to, and paid by, the company who originally undertook to complete the contract. Written confirmation from your end client would be valuable in an enquiry.
The client may retain the right to veto a substitution on reasonable grounds, however this should be limited to factors such as the qualifications/experience of the proposed substitute, or security issues.
Find out more about this test.