Express & Echo v Tanton: When A Substitution Clause Ends The Case

Somewhere in your contract there is a clause saying you can send someone else to do the work. HMRC's status decision either ignores it or waves it away: you never used it, so it does not count. You are left wondering whether that clause is a trump card or wallpaper.

In 1999 the Court of Appeal answered that question for a newspaper delivery driver in Devon. Ernest Tanton wore the company's uniform, drove a company-provided vehicle, and delivered a fixed round in an order the company dictated. The Inland Revenue insisted he was an employee and taxed him accordingly. One clause in his contract let him send a substitute—and the Court of Appeal held that, as a matter of law, he was self-employed.

The case is Express & Echo Publications Ltd v Tanton [1999] EWCA Civ 949. This article explains why his clause was decisive, why many substitution clauses are not, and what evidence separates the two. The dispute itself was about employment rights, but HMRC's manual and the tax cases have applied its rule ever since. If your status dispute turns on personal service, this is the authority everything else orbits.

The Clause That Decided Everything

Mr Tanton had been an employed driver for Express & Echo, a newspaper publisher, until he was made redundant in 1995. The company re-engaged him that August on terms both sides understood to be self-employment—the judgment records that "Mr. Tanton having little alternative agreed".

A written "Agreement for Services" followed in January 1996. He refused to sign it, but told the court he always abided by it—and the case proceeded on those terms. Working to an unsigned contract does not make its terms disappear. Clause 3.3 said:

"In the event that the Contractor is unable or unwilling to perform the Services personally he shall arrange at his own expense entirely for another suitable person to perform the Services."

Peter Gibson LJ's reaction: "That is a remarkable clause to find in a contract of service." A "contract of service" is the lawyers' name for employment; a "contract for services" is self-employment—two near-identical labels with opposite outcomes.

Two features gave the clause its force. First, "unable or unwilling": he did not need a reason—he could simply choose not to turn up, so long as someone suitable turned up instead. Second, "at his own expense": he found the substitute and paid them out of his own fee, so if he found cheaper cover he kept the difference. He could profit from his own absence.

One honest qualification. Paragraph 13 of the contract's schedule required him to satisfy the company that any relief driver was "trained and is suitable to undertake the services", so the right was not literally condition-free. The Court of Appeal still treated it as a right to have the services performed through an acceptable substitute, and held it inconsistent with employment. A suitability check did not turn the clause into a fetter that mattered.

How A Tribunal Win Became A Court Of Appeal Loss

Tanton asked the Industrial Tribunal to confirm that he was an employee and to order the written particulars of employment an employee is entitled to—relief only an employee can claim. An Industrial Tribunal chairman, sitting alone in September 1997, found that he was one: clause 3.3 was "only one factor out of many", and the chairman was "more concerned with what actually occurred than with what the documents recorded". The Employment Appeal Tribunal did not disturb that finding—it held the chairman had reached a permissible conclusion and refused leave to appeal. Pill LJ granted leave on paper, and the Court of Appeal allowed the company's appeal. Winning on self-employment meant Mr Tanton lost the employment rights he had gone to the tribunal for—status arguments cut both ways, in tax and out of it.

What let the court interfere was the structure of the question. Counsel for the company put forward a three-step approach, which Peter Gibson LJ adopted ("He rightly submitted that the correct approach is as follows"):

"(1) The tribunal should establish what were the terms of the agreement between the parties. That is a question of fact. (2) The tribunal should then consider whether any of the terms of the contract are inherently inconsistent with the existence of a contract of employment. That is plainly a question of law … (3) If there are no such inherently inconsistent terms the Tribunal should determine whether the contract is a contract of service or a contract for services, having regard to all the terms. That is a mixed question of law and fact."

Step two is the one to remember. Whether a term is inherently inconsistent with employment is a question of law, so an appellate court can substitute its own answer instead of deferring to the fact-finder's overall impression. That is the same door a point-of-law appeal opens into the Upper Tribunal today, and it is why a contract-construction argument is one of the few status points that can survive an appeal intact. Our guide to Edwards v Bairstow and errors of law explains how narrow that door usually is.

Personal Service Is The Irreducible Minimum

So what is inherently inconsistent with employment? Peter Gibson LJ held that:

"it is necessary for a contract of employment to contain an obligation on the part of the employee to provide his services personally. Without such an irreducible minimum of obligation, it cannot be said that the contract is one of service."

And the consequence:

"it is, in my judgment, established on the authorities that where, as here, a person who works for another is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer."

Notice what did not matter: the uniform, the company vehicle, the dictated running order, the fixed fee the company set. None of it was weighed, because the analysis never reached the weighing stage. Clause 3.3 was "wholly inconsistent" with a contract of service, and both the chairman and the EAT had "erred in law. The only conclusion which they could properly have reached was that this was a contract for services."

If you have read our analysis of Ready Mixed Concrete, you will recognise condition (i) of MacKenna J's three conditions: the worker agrees to provide his own work and skill. Tanton is the case where that condition ends the argument on its own.

Peter Gibson LJ drew the comparison himself: "In the present case the position is even clearer than it was in the Ready Mixed Concrete case". In Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 the owner-driver could appoint another driver only "with the consent of the company for which he worked"; Tanton needed no one's consent. And the judgment adopts MacKenna J's statement of the principle: "Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be". The caveat matters in the other direction too: a substitute does the work instead of you. Bringing along an occasional helper who works alongside you is not substitution.

A Term You Never Use Is Still A Term

HMRC's most common answer to a substitution clause is that it was never, or hardly ever, used. Tanton deals with that directly:

"If a term is not enforced that does not justify a conclusion that such a term is not part of the agreement. The obligation could be temporarily waived."

Status is decided by the parties' obligations, not by a diary of what happened. But the same judgment supplies the counterweight:

"Of course, it is important that the Industrial Tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham it will want to say so."

A sham, in this context, means a term the parties never truly intended to operate—words on the page that do not match the real deal. Tanton's clause survived that scrutiny because it was real. The chairman himself found it was not a sham and not "mere window-dressing": the right to provide a substitute "was utilized by him from time to time and exceptionally, throughout a period of six months whilst Mr. Tanton was ill", with Tanton paying the substitute driver while the company continued paying him.

The Supreme Court has since confirmed both halves of this. In Autoclenz Ltd v Belcher [2011] UKSC 41, Lord Clarke set out two propositions as established law. First, a genuine right of substitution negates the obligation to perform work personally and is inconsistent with employee status (Tanton, per Peter Gibson LJ at p 699G of the ICR report). Second, a contractual right does not stop being a term of the agreement merely because it is not used (Tanton at p 697G).

How Fettered Is Too Fettered

Almost no substitution clause is as generous as Tanton's, and this is where most real arguments live. The cases since have drawn a spectrum:

MacFarlane v Glasgow City Council [2001] IRLR 7 concerned gymnastics instructors who, if unable to take a class, had to arrange a replacement from a register of coaches the council maintained—and the council paid the replacement directly. As Park J recorded in Usetech Ltd v Young [2004] EWHC 2248 (Ch), an IR35 case, the Employment Appeal Tribunal in MacFarlane held:

"The relevant clause in Tanton was extreme. The individual there, at his own choice, need never turn up for work. He could, moreover, profit from his absence if he could find a cheaper substitute. He could choose the substitute and then in effect he would be the master. Properly regarded, Tanton does not oblige the tribunal to conclude that under a contract of service the individual has, always and in every event, however exceptional, personally to provide his services."

The Supreme Court refined the line in Pimlico Plumbers Ltd v Smith [2018] UKSC 29. "The sole test is, of course, the obligation of personal performance", said Lord Wilson (para 32), and it can be helpful to ask whether the dominant feature of the contract remained personal performance.

Mr Smith could pass a job to another operative, but the limitation on that right was significant (para 34): "the substitute had to come from the ranks of Pimlico operatives, in other words from those bound to Pimlico by an identical suite of heavy obligations. It was the converse of a situation in which the other party is uninterested in the identity of the substitute, provided only that the work gets done." He remained obliged to perform personally.

HMRC's own manual accepts this framework. ESM0531 treats a substitution clause as pointing towards self-employment, and treats one as far-reaching as Tanton's as capable of deciding the question on its own. But it sets two provisos: the right must be genuine, and the worker must engage and pay the substitute personally. Offering to arrange cover that the engager then organises and pays for does not count. ESM7210 is HMRC's page on Tanton itself; ESM7220 its page on MacFarlane.

If your clause sits at the fettered end of the spectrum, the argument is not lost—it moves to the multi-factor weighing described in Hall v Lorimer, where substitution becomes one brushstroke in the whole picture rather than the end of the case.

Why Your Written Contract Counts For More In A Tax Appeal

There is one more turn, and it matters most in tax. In employment-rights cases, Autoclenz lets a tribunal look past the written terms to the "true agreement" where the paperwork does not reflect reality. But the Court of Appeal in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501 held (paras 156-160) that the Autoclenz approach is not available in the income tax context.

For a status appeal, that cuts both ways. Your written clause carries more weight: the tribunal construes the contract as made, rather than reconstructing the deal from conduct. But HMRC's attack narrows correspondingly, to genuineness and sham—which is precisely where evidence decides it.

If your dispute is under IR35, there is a third route to watch. The tribunal decides status under a hypothetical contract between you and the end client, and a substitution clause that exists only in your agency contract may not carry across into it. That is how the contractor in Usetech lost: Park J held that the hypothetical contract would not have contained the substitution provision at all.

One guard against overclaiming. The Supreme Court's decision in HMRC v Professional Game Match Officials Ltd [2024] UKSC 29 reworked how mutuality of obligation and control are analysed, but it did not touch the personal-service limb, so this line of authority stands. Our PGMOL analysis explains why substitution remains the cleanest first-stage argument left after that decision.

Making The Clause Real

None of this is drafting advice, and a genuine clause is not a guarantee—but the decided cases are consistent about what has persuaded tribunals that a substitution right is real. In Tanton the decisive facts were these:

• The clause had been used. Not constantly—"from time to time and exceptionally"—including the six-month stretch of illness.
• He chose the substitute, and he paid them out of the fee the company went on paying him. Who engages and pays the substitute is the single strongest fact in the case, and it is the same feature HMRC's manual insists on.
• The wording said "unable or unwilling", not just "unable". A right exercisable by choice looks like a business arrangement; cover for incapacity can look like sick-leave logistics.
• The engager had no veto, approved list or in-house cover arrangement—only a check that the substitute was suitable.

The mirror questions for your own arrangement follow. Has the right ever been exercised? Who found, and who paid, the substitute? Does your clause say "unable or unwilling", or only "unable"? Would the engager actually honour it if you invoked it tomorrow? A paper right the engager would refuse in practice is a sham finding waiting to happen.

Where those questions land depends on the dispute. If you are in an IR35 or off-payroll dispute, HMRC's CEST tool (Check Employment Status for Tax) asks the substitution question directly; in construction, the same personal-service question sits underneath routine status disputes. Either way, the answers belong in your grounds of appeal and in the evidence you file, not saved up for the hearing.

One practical footnote. A status challenge arrives as an appealable decision—typically a Regulation 80 PAYE determination, a National Insurance status decision or a closure notice—and you normally have 30 days from the date of the decision to appeal. Our guide to appealing to the tax tribunal covers the steps. Under the post-2021 off-payroll rules the decision often goes to the fee-payer rather than the worker, so check whose appeal right it actually is.

Then there are the two closing lessons Mr Tanton himself supplies.

He argued his case in the Court of Appeal in person—the judgment notes he "addressed us today with great courtesy"—as do around 45% of tax tribunal appellants today.

He told the court that while on sick leave, "only able to get about on crutches", he had been required to do a shift himself when his substitute was unavailable. That was potentially a devastating fact for the company's case. It counted for nothing, because he had never given that evidence to the Industrial Tribunal:

"But, of course, the Employment Appeal Tribunal is not the tribunal of fact. The Industrial Tribunal is the body appointed by Parliament to determine the facts in industrial tribunal cases. Accordingly, that particular incident cannot help Mr. Tanton."

Translate that to your appeal: the First-tier Tribunal is your tribunal of fact; the Upper Tribunal is not. A helpful fact left out of your FTT witness statement is, in practice, gone.

And the final irony. From the outset the Inland Revenue "would countenance no view other than" that Tanton was an employee, so he was paid under deduction of tax and National Insurance throughout. He was still self-employed as a matter of law. How HMRC has been taxing you does not decide your status. What you actually agreed, and whether that agreement was real, does.

Key Legislation And Resources

The Judgment

• Express & Echo Publications Ltd v Tanton [1999] EWCA Civ 949 — Court of Appeal (Civil Division), 11 March 1999; the reasoned judgment is Peter Gibson LJ's, with Hirst and Auld LJJ agreeing. Also reported at [1999] ICR 693 and [1999] IRLR 367.

Key Cases

• Express & Echo Publications Ltd v Tanton [1999] EWCA Civ 949 — a genuine right not to perform the services personally is, as a matter of law, inconsistent with employment
• Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 — condition (i): personal service, with the limited-delegation caveat; its consent-based clause distinguished in Tanton
• MacFarlane v Glasgow City Council [2001] IRLR 7 — unable-only clause, council register, council-paid substitute: consistent with employment
• Usetech Ltd v Young [2004] EWHC 2248 (Ch) — IR35 case reviewing the Tanton/MacFarlane line; the source for the MacFarlane passage quoted above
• Pimlico Plumbers Ltd v Smith [2018] UKSC 29 — personal performance as the sole test; the "dominant feature" question; workforce-only substitution not a knockout
• Autoclenz Ltd v Belcher [2011] UKSC 41 — Tanton's two propositions restated as settled law; the employment-rights "true agreement" approach
• HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501 — the Autoclenz route unavailable in the income tax context
• HMRC v Professional Game Match Officials Ltd [2024] UKSC 29 — mutuality and control reworked; the personal-service limb untouched

HMRC Guidance

• ESM0531 — the requirement for personal service — HMRC's two provisos: the right must be genuine, and the worker must engage and pay the substitute
• ESM7210 — Express & Echo Publications Ltd v Tanton — HMRC's own summary of the case
• ESM7220 — MacFarlane and Skivington v Glasgow City Council — HMRC's summary of the qualifying case
• Check Employment Status for Tax (CEST) — asks the substitution question directly; not binding on a tribunal

On This Site

• Ready Mixed Concrete: the three conditions — the framework Tanton's knockout sits inside
• PGMOL v HMRC: employment status — the modern restatement, and why substitution is the strongest first-stage argument left
• Hall v Lorimer: painting the whole picture — the weighing exercise your case moves to if the clause is fettered
• Edwards v Bairstow: error of law — the point-of-law gateway that contract-construction arguments fit through
• IR35 and off-payroll appeals — where substitution arguments are deployed today, including CEST
• CIS appeals — status characterisation in construction, the classic substitution industry
• Writing grounds of appeal — putting the clause, and its history, into the grounds HMRC has to answer
• How to appeal to the tax tribunal — the deadline and filing steps once a status decision lands
• Upper Tribunal appeals — appeals on points of law, and why new evidence cannot go in there
• Preparing for your tax tribunal hearing — witness statements: getting every helpful fact before the tribunal of fact

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.