ESM0560 - Evaluative Exercise required at the third stage of Ready Mixed Concrete
Source: gov.uk (2025-02-06)


The stage three Ready Mixed Concrete test for employment status was not before the Supreme Court in the PGMOL case, but the judges in that case endorsed the approach taken by the Court of Appeal in The Commissioners for Her Majesty’s Revenue and Customs v Atholl House Productions Ltd [2022] EWCA Civ 501 (AHPL) case which is summarised as follows:

Mutuality of obligation and a 'right of control' are necessary pre-conditions of employment. The terms of the contract then need to be considered to see if it is consistent with an employment relationship, but there will inevitably have to be one or more relevant factors pointing the other way if the court or tribunal is to conclude that the contract is not one of employment - p75,76,113 and 169 of AHPL at the Court of Appeal.

The third stage of the Ready Mixed Concrete test is therefore a multi-factorial test under which mutuality of obligation and the extent of any right of control can be considered again - p169 of AHPL at the Court of Appeal. If either factor is a relevant factor at the third stage, it is just one of many factors that may be relevant to determining the nature of the contract.

The limit on the choice of factors in the multi-factorial test is a more difficult question. If the worker is known to carry on a business on their own account, then that should not be ignored and any weight attached to it is a matter for the decision maker - p123 and 124 of AHPL at the Court of Appeal.

Any other engagements must be known or reasonably available to the engager if they are to be considered, but importantly the Court of Appeal confirmed that the terms of the engagement with the end user 'remain central' to the enquiry - p130 of AHPL at the Court of Appeal. ‘The focus at the third stage remains anchored on the contract in issue, but the angle of the focus widens out to take in the context and circumstances in which the contractual relationship is created; the direction of the perspective is to zoom out from the contract in issue’ not vice versa ‘The flaw in the tribunals’ approach in Atholl House, as I understand it, is to approach the third stage from the peripherals, focusing on Ms Adams’ career outside the relevant contract in the light of Ms Adams having been in business on her own account. The flaw of the UT’s approach in Atholl House is analysed by the Court of Appeal at [125] to [139].’ – para. 59 of The Commissioners for His Majesty’s Revenue and Customs v S&L Barnes Ltd [2024] UKUT 00262 (TCC) confirming para. 133 of the FTT decision in the same case.

A factual circumstance not known or reasonably available to one party (such as, for example, the precise terms on which the person doing the work has performed work for other parties if those terms have not been disclosed to the alleged employer) cannot be taken into account by the engager in the evaluative exercise - p170 of AHPL at the Court of Appeal

A person may move from being self-employed to employed, and vice versa, while working for the same engager.

An individual may simultaneously be engaged under a contract of employment with one engager and under contracts for service with one or more other engagers for the same or similar work.

Parties can no longer rely on Autoclenz to disregard terms of the actual written contracts as 'sham' in an income tax context. This does not affect the ability of parties to rely on a ‘sham’ more generally in an income tax context. Parties can still use ordinary principles of contractual interpretation to construe contracts in their factual matrix, including facts outside of the contractual arrangements when determining the terms of actual or hypothetical contracts of service. References in s49(1)(c) and (4) ITEPA 2003 to 'circumstances' can include non-contractual agreements. Contractual rights which have not been exercised can still form part of the agreement between the worker and engager.