The Ready Mixed Concrete case (or to give it it’s full name, Ready Mixed Concrete (South East) Ltd vs Minister of Pensions and National Insurance 1968) was dealt with in 1968 – a whole 32 years before IR35 was even introduced. However, it’s considered a cornerstone in IR35 case law and, despite its age, is still used to defend the vast majority of off-payroll tribunals to date.

This is because it clearly outlines two of the three ‘key employment status tests’ that are used to determine if a contractor is genuine. Specifically, the case looked in depth at the importance of a lack of personal service of an individual (otherwise known as substitution) to be present for the contractor to indeed be genuine. It also identified the requirement for the contractor to maintain full control over their work to be genuine, as well as assessed the potential for control to be exerted by the client.

Ready Mixed Concrete case background

Let’s have some case background.

Mr Latimer was originally engaged by Ready Mixed Concrete (RMC) in a number of roles, until he entered into a contract to collect, carry and deliver concrete over a period of two years. Mr Latimer entered into a hire-purchase agreement with RMC as an ‘Owner driver’ of a truck to undertake the contract.

Initially, the Minister of Pensions and National Insurance determined that Mr Latimer was an employee of Ready Mixed Concrete. This decision was then appealed by Ready Mixed Concrete (RMC), mainly because they then would’ve been liable to pay National Insurance Contributions (NICs) for Mr Latimer as an employee of theirs, as opposed to a self-employed individual. The case was escalated to the High Court for judgement.

What makes a contract of service, as outlined in the Ready Mixed Concrete case

Mackenna J provided the following opinion on the case;

“I must now consider what is meant by a contract of service.[Note; a contract of service is one between an employee and an employer, not to be confused with a  contract for service]

A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.”

As you can see straight away, points (i) and (ii) are very similar to the familiar ‘lack of personal service’ requirement, and the need for the client’s lack of control over the work that are mentioned in the key status tests.

Ready Mixed Concrete case highlights importance of personal service

He further went on to qualify points (i) and (ii) as follows:

“As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service.”

When broken down, he states quite clearly that an individual must provide their own service – and no one else’s - in an engagement for it to be considered a contract of employment. If alternate individuals can be provided (i.e. a substitute) then it becomes difficult to argue that the engagement requires the services of a sole individual, suggesting that the contractor is genuine.

Ready Mixed Concrete case highlights importance of control

Further;

“As to (ii). Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted.”

In short, Mackenna J concluded that Control is made up of multiple aspects – namely, What, How, When, and Where. These are covered specifically in the above statement. If even one of those aspects is present in a contract, then it can be argued it is in-line with a contract of service (Ie. Employment).

Point (iii) in Mackenna J’s commentary was simply meant to clarify that whilst (i) and (ii) are key indicators, they are by no means the only indicators towards status. Other indicators (such as Mutuality of Obligation, which is not expressly covered in Mackenna’s commentary) need to be taken into account too.

Ready Mixed Concrete case outside-IR35 decision

The Judgement provided by Mackenna J was that Mr. Latimer was in fact, not an employee of RMC, which ran in contrary to the original conclusion given by the Minister of Pensions. This was backed up by the following evidence Mr. Latimer’s favour;

  • Mr. Latimer’s contract specifically stated that he could engage an alternate driver to complete the service on his behalf, albeit with RMC’s consent. This suggests that Mr Latimer did have a right to substitute but it was fettered by the need to seek consent so was not as strong as it could have been.
  • Whilst Mr. Latimer was given strict timetables for delivery of the concrete, no stipulation was made over the method of delivery (Ie. what route was taken).
  • Mr. Latimer did not need to seek client approval for time off – he simply arranged time off with the other owner drivers so that cover would be arranged in his absence (conveniently feeding into his right to substitute when using a relief driver)
  • There were clear differences between employees doing a similar role and Mr. Latimer. Specifically, employees needed to seek approval for time off, had fixed hours, did not need to pay for maintenance / running costs of their trucks, and given fixed routes they had to adhere to when delivering.

Additional notes for contractors

Whilst over 50 years old at this point, it is still an extremely important and relevant bit of case law. The Ready Mixed Concrete case laid down the foundations of the key status tests we are familiar with in today’s IR35 landscape, and likely continue to influence off-payroll tribunal results for the foreseeable future.

Should you want some peace of mind, we offer a full contract review amongst other services to help you prepare for IR35. We’ll give an explicit pass or fail based on the current contract you hold, along with comprehensive comments on how to improve any problem areas.

We also offer IR35 tax investigation insurance which protects against the court costs that could arise from an HRMC case. It also covers representation by a tax specialist at a tribunal.

For any further information or advice, please call us on 01163 800 400 or email us.

Leave a Reply

Sorry, you must be logged in to post a comment.