Ian Mitchell is a consultant cardiac surgeon employed by a NHS Trust in Nottingham. In addition he also has a private practice through which he performs operations at, principally, the Park Hospital in Nottingham. To assist him in carrying out these operations, Mr Mitchell would elicit the services of Dr Bhimagunta (Dr B) who was also a trusted colleague within the same NHS Trust.
Dr B was engaged on a self-employed basis and during the two years ended 5th April 2007 received a total of £6,000. HMRC took the view that Dr B was an employee of Mr Mitchell’s and duly raised PAYE and NIC assessments, in August 2009, totalling £3,228 which were appealed to the First Tier Tax Tribunal.
In addition to Dr B, Mr Mitchell would arrange for an anaesthetist, with whom he had worked before, to assist in the operation. The anaesthetist would bill the patient or more commonly the patients’ insurance company directly. Mr Mitchell would also arrange the services of one or two perfusionists to assist with the operation. These would be supplied and paid for by the Park Hospital. The hospital also provided and paid for the nursing staff.
All surgical instruments and equipment (including stitches) were also provided by the Park Hospital.
The patient/insurance company would receive three bills for the operation; one from Mr Mitchell, one from the anaesthetist and one from the hospital.
On 1st February 2005, Mr Mitchell and Dr B entered into a “Self-Employed Contract for Services”. Notable clauses included:
• That Dr B was in business on his own account as an independent surgical assistant;
• The right to send a substitute at the discretion of Dr B and that Dr B would remain responsible for paying any replacement;
• A verbally agreed fixed fee for each operation with no payment being made for any cancelled operation;
• The contract could be terminated by either party, for whatever reason, at any time and without notice;
• Absence of any mutual obligations by either party;
• No entitlement to sick pay, travel expenses or holiday pay; and
• An intention by both parties to create a self-employment relationship.
In reality, there was no right of substitution as Mr Mitchell made it clear that he would not accept a replacement nominated by Dr B unless it was a registrar whom he knew well and Dr B accepted that he never offered a substitute. When arranging an operation, Mr Mitchell would ask Dr B if he was available. If he wasn’t available then Mr Mitchell would ask another doctor to assist or, occasionally, rearrange the date of the operation. Mr Mitchell valued Dr B’s skill, experience and their close working relationship that bordered on the intuitive. He firmly believed that, in the context of cardiac surgery, such a relationship was crucial to the patient’s safety which was of paramount importance. The normal fee paid to Dr B was between £120 – 150, regardless of the length or complexity of the operation. There were occasions when an operation was cancelled and Dr B received no payment despite turning up at hospital.
Mr Mitchell had overall responsibility and control of the operation and to ensure that each member of the team was doing their allotted task at the necessary time. Where necessary, he would instruct members of the highly skilled medical team when to do things and what drugs to use. Other than this, team members were left to get on with their specific tasks.
Although Dr B was free to work on private operations with other consultants, he was not popular with them and was only used by Mr Mitchell.
Dr B maintained his own Medical Defense Union insurance, which was necessary to enable him to operate in the private sector. It was not, however, a requirement of his NHS work.
The Tribunal considered the various and well known tests of employment status and how these applied to the evidence put before them and came to the following conclusions:
Control
Mr Mitchell likened his role in an operation as that of a conductor of an orchestra. Whilst all members of the operating team were subject to the control and co-ordination of Mr Mitchell nevertheless each highly skilled member performed their task with limited interference which was only to be expected. Dr B was expected to perform his role with minimum supervision which was one of the main reasons Mr Mitchell engaged him.
The control test was considered to be of limited assistance. The control of an operation was broadly neutral in determining Dr B’s status, as was the determination of the place, time and nature of the operation.
Mutuality of obligation
Whilst it was accepted that there was no obligation on Mr Mitchell to provide Dr B with work and that he only used Dr B on an ad hoc basis, the test was considered to be of little assistance in determining whether or not mutual obligations existed within each individual engagement, ie did each separate engagement amount to a contract of employment?
Right of substitution
Although there was no effective right of substitution and that Dr B undertook to perform the services personally, this did not indicate the presence of a contract of employment. Where a person who is a highly skilled professional is hired because of their particular expertise, the hirer will often be reluctant to accept a replacement. The substitution test, in this case, was therefore considered to be neutral.
Business on own account
The only equipment that Mr Mitchell and Dr B were expected to provide at an operation was their surgical goggles. It was a fact that they could not have provided the surgical instruments because cardiac surgery is carried out in a sterile environment and instruments for each operation would be supplied by the hospital and not by the surgeons.
The fact that there was only one hirer would point towards employment but, on the other hand, the sporadic nature of the engagements and their limited duration when combined with the highly specialised nature of the skills involved, pointed the other way towards self-employment and this outweighed the fact that Mr Mitchell was the sole engager.
Financial risk
Mr Mitchell paid Dr B when he received payment from the patient or the insurance company and had never failed to pay the doctor. Whilst there were instances of Dr B turning up for an operation only for it to be cancelled and therefore no fee was received, it was considered that this amounted to minimal financial risk.
A fixed fee, regardless of the time involved, was suggestive of self-employment but equally a marginal pointer towards employment was the fact that Dr B had little or no responsibility for investment and management.
Intention of parties
Usually the intention of the parties is not determinative but in borderline cases such as this one it is taken into account. Both Mr Mitchell and Dr B had specifically intended that Dr B would be selfemployed. The Tribunal considered that none of the usual status tests provided a compelling answer but, on balance, they found in favour of Mr Mitchell because of:
• The very limited and ad hoc nature of the engagements and the fixed price per operation, when viewed collectively with the very skilled professional services which Dr B was required to deliver, indicated a contract for services; and
• Intention of parties to create a self-employed relationship was relevant to decide this borderline case.
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