British Car Auctions (BCA) loses status dispute due to substitution clause, sat idle and unused for 25 years

Kingsbridge says dormant sub clauses aren’t automatically problematic for ‘outside IR35’ status, even if HMRC is actively probing personal service.  

A substitution clause that wasn’t invoked once in 25 years is alerting ‘outside IR35’ contractors to the need for an unfettered, genuine right of substitution. 

British Car Auctions, the owner of Webuyanycar.com, needed the clause to stand up in its appeal against its drivers being ruled as workers, not self-employed. 

‘Substitution, the central issue in British Car Auctions (BCA) V Brian Parker’ 

Quoting from the ruling, ReLegal Consulting says right of substitution is the “central issue” in BCA’s appeal to the Employment Appeal Tribunal (EAT) – BCA Logistics Ltd (BCA) v Brian Parker and others. 

Egos, another legal advisory, said yesterday that on the face of it, BCA’s contract with the drivers contained a “near-perfect” substitution clause. 

‘Both grounds of BCA’s appeal to the EAT related to substitution’ 

However, Gabriel Morrison of Leigh Day, which represented 422 of the BCA drivers at the EAT, indicates that substitution was even more significant than merely ‘central’ to the appeal, and the substitution clause was far from ‘perfect’. 

“BCA’s appeal [to the Employment Appeal Tribunal] was on two grounds, but both related to substitution”, Mr Morrison, Senior Associate Solicitor, began in a statement to Kingsbridge. 

“The first was that the [ET] judge had placed improper emphasis on the absence of drivers giving evidence for BCA. 

“And that this impropriety had infected [the ET judge’s] findings on the positive evidence British Car Auctions had put forward of substitution use.  

“The second ground was that the [ET] judge had unfairly discounted positive substitution evidence, on the grounds that BCA’s key witness was searching for evidence that could be used to defend the litigation.” 

‘Substitution clause in BCA driver contracts wasn’t genuine’ 

As to the substitution clause, it was “not genuine or expected to be used”, continued Mr Morrison, outlining what the BCA drivers argued on June 11-12th 2025. 

The EAT has now agreed.  

In fact, in his ruling handed down on July 4th 2025, EAT Judge John Patrick Cavanagh found that no driver had ever used a substitute in 25 years of BCA’s operations. 

There was also evidence that when a request to use a substitute was made, that request was refused by BCA.  

‘Right of substitution (RoS) is a strong indicator away from employment’ 

In fact, when two drivers had asked BCA about sending a substitute driver, neither of the two ended up substituting, observes Kingsbridge’s Matt Tyler. 

“Showing a lack of personal service, inclusive of a right of substitution, is one of the strongest indicators pointing away from a contract of employment.  

“That’s why ‘outside-IR35’ contractors are correct in 2025/26 to ensure that not only is their right unfettered but that it’s genuine too. 

“To be genuine, the right must be enshrined in the role, both in the written terms and in reality. But in two non-IR35 cases, first ‘Shanks’ and now ‘BCA,’ the substitution clauses didn’t stand up to scrutiny.” 

‘Sceptical about BCA’s evidence’ 

Kingsbridge’s IR35 Consultancy Manager, Mr Tyler added: “In BCA, about one of the two drivers who enquired about sharing their trade plates and equipment with a substitute, the EAT said it was ‘sceptical’ about the evidence.  

“The EAT may be ‘sceptical’ as both requests from both drivers, who ultimately never substituted, were made after tribunal proceedings first began in 2020.”  

Apportioned jobs via an app, BCA drivers delivered and sometimes inspected cars sold through Webuyanycar.com, and its other companies, such as Cinch.com. 

Insured by BCA, each driver received a trade plate, permitting the driver to collect an unregistered or untaxed vehicle “for the purposes of business movement,” the judgment says. 

BCA would pay for the trade plate licences from the DVLA and issue them to the drivers, so they could collect cars from a seller and deliver them to a buyer.  

‘Near-perfect sub clause was, in reality, a clause in a vacuum’ 

However, BCA not being across these sorts of practicalities may explain how the “near-perfect” sub clause – as Egos put it – amounted to no more than a “clause in a vacuum”, as Egos also put it. 

“One interpretation of the facts found…may be that BCA…simply hadn’t thought through how substitution might work in practice”, the legal firm says. 

“As the ET judge stated in 2023, ‘There are clear practical difficulties with self-employed drivers using substitutes, including difficulties relating to trade plates, insurance, data protection and equipment. 

“‘What became obvious at the hearing was that the respondent had given little thought as to how these difficulties could be overcome.  

“‘Even if the issues which I have outlined were surmountable there was no plan or process in place for what would happen in practice.’” 

‘The IR35 situation’ 

In the case of ‘limb (b) worker rights’, it is generally the engager who controls the scenario into which a substitute might be deployed, advises Egos’ legal consultant Roger Sinclair. 

The engager tends to be interested in demonstrating the “genuineness” of the RoS, and by doing so, refutes the worker’s claim to have been obliged to provide ‘personal service,’  

“By contrast, in the IR35 situation,” Mr Sinclair continued to Kingsbridge, “it will generally be the contractor who has that interest, in order to refute a claim by HMRC that one essential element of IR35 – personal service – is present. 

“For the contractor-IR35 scenario, it may often be sufficient to show an unfettered contractual right of substitution. 

“And this would generally establish a prima facie position, which HMRC would have to displace with sufficient evidence to the contrary. 

“[Yet] there is much greater scope for the engager of an individual seeking to establish ‘limb (b) worker rights’ to shoot itself in the foot, [as the BCA case illustrates].” 

‘Practical issues with BCA drivers using substitutes’ 

Fresh from representing the 422 drivers at the EAT, Leigh Day confirmed to Kingsbridge yesterday that the tribunal found “practical issues” with drivers using substitutes. 

“BCA had no process or procedure in place for their use,” said Leigh Day’s Mr Morrison, responding to questions. 

“And there were problems around how substitutes would be insured, how the relevant training would be provided to them, and whether drivers could share their trade plates and equipment with their substitutes.  

“All of these factors resulted in the EAT finding that the substitution clause was not genuine.” 

‘Substitution has to be both practical and plausible’ 

Having read the judgment against BCA, tax lawyer Rebecca Seeley Harris, of Re Legal Consulting, offered some tips to engagers. 

“Substitution has to be both practical and plausible according to HMRC.  

“In view of that, [engagers] need to have a substitution policy to ensure that any clauses allowing substitution can actually work in practice. 

“And this is something that has come up quite a lot recently in the courts, which likely explains why HMRC is also pursuing the angle of substitution and personal services, as the tax office did in the IR35 case of George Mantides.   

“So substitution is being looked at, in both employment rights cases and tax.” 

‘Personal service questions asked in active IR35 investigations’ 

Asked if contractors ought to be concerned by ‘HMRC pursuing the angle of substitution,’ Seeley Harris said in the newly updated CEST, HMRC has created a section on personal service.   

“One of the arguments to prove personal service is the lack of the ability to substitute,” the tax lawyer told Kingsbridge.  

“This was seen in Mantides in both the [First-tier Tribunal] (para.103(3)) and the [Upper Tribunal] (para. 47).  

“But, I also understand that it is part of HMRC’s current questioning – in active IR35 investigations.” 

‘Dormant substitution clause isn’t fatal to outside IR35 position’ 

Last night, from Kingsbridge’s offices in Tewkesbury, Gloucestershire, Mr Tyler cautioned against regarding a 25-year-old substitution clause as automatically fatal to an ‘outside IR35’ position. 

He suggests that if it hasn’t been actioned, the key with such a substitution clause (other than it not being unreasonably restricted) would be its ‘genuineness’ – its intent and plausibility. 

Mr Tyler explains: “Personally, I am of the opinion that a ‘dormant’ substitution clause that has not been utilised in 25 years is not indicative of not being able to substitute.  

“I have been dealing with IR35 for over 15 years, and I can say with some confidence that, out of the cases that we as IR35 insurers have been involved in, the number of substitutions that have actually occurred is quite low. Maybe two dozen. 

“But that doesn’t mean substitution is irrelevant in the majority of IR35 cases.   

“It is very fair to say, however, that the right to substitute must be genuine, and not just a throwaway clause chucked into a contract and left to languish.” 

‘Right of substitution is important’ 

Kingsbridge says HMRC emphasises what it deems important about substitution in ESM0535, which states: 

“It is the right of substitution that is important. The fact that substitution has not actually occurred during a contract is not necessarily relevant.”  

‘Discuss substation rights during contract negotiations’ 

Nonetheless, “as much as possible” should be done to ensure that the substitution clause is a “genuine representation of the facts and that all parties are open to the idea of substitution”, says Mr Tyler. 

“Introducing policies into the client’s business as to how to handle substitution is one such way,” he exampled. 

“Similarly, discussing substitution rights during contract negotiations is another way of ‘firming up’ the right to substitute, as realistically very few personal service companies will actually substitute in their working careers – but it does not mitigate the fact that they all should be able to do so if they desire.” 

But Kingsbridge’s IR35 Consultancy Manager also said actioning a sub clause solely to prove it is genuine (as the two BCA drivers potentially did), would be ill-advised. 

‘HMRC could see it as a sham arrangement’ 

“As a rule, I would be a little careful about exercising a right to substitute to ‘prove a point’”, he says.  

“Under IR35, unless it is done correctly – led and paid for by the limited company contractor, with a genuine view to having the substitute take over the work for a reasonable period, for example – then this too could be seen as a ‘sham’ arrangement. And therefore not a genuine showing of substitution.” 

‘BCA will now be worth a look for HMRC’ 

The EAT finding that BCA didn’t have a genuine showing of substitution – even though it relied on lack of personal service for both grounds of appeal against the ET’s ruling that its drivers are workers – appears to cue up HMRC. 

Carolyn Walsh, formerly an inspector for the Revenue, told Kingsbridge: “There are over 1,000 self-employed drivers – only [approximately] 500 in the action – engaged by BCA, so this will be worth a look as far as HMRC is concerned. 

“Therefore, the drivers may have their self-assessment returns – and consequently the relief claimed on their work-related expenses – challenged. And BCA may owe a substantial amount in National Insurance.” 

‘BCA at risk of employment status investigation’ 

Director at Oblako Ltd, Walsh added: “From reading the judgment against BCA, it seems there is a substantial amount of control, mutuality of obligation, and no real right to employ a substitute. That just leaves Financial Risk.’  

“So, unless the drivers have sufficient insurance, and are ready to or do cover BCA losses for any substandard work by way of deduction from payments or making good losses, they’ll likely have a hard time defending against an employment status investigation from my former employer.” 

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