Working through a limited company? You may still be an employee
A tribunal ruled that a commissioning director with 24 years' service remained an employee even after switching to a consultancy agreement via his own limited company.
1 min read · Last updated 19 May 2026
Case details
Key facts
- The claimant worked for the respondent from 1997 until 31 August 2021 as an employee.
- From 1 September 2021, the claimant provided services through his limited company ST Care Consultancy Limited under a consultancy agreement.
- The consultancy agreement was entered into to resolve a difficult relationship between the claimant and the managing director.
- The claimant continued to perform substantially the same duties and received the same remuneration as before.
- The substitution clause in the consultancy agreement was never invoked and was not realistic given the nature of the work.
- The tribunal found that the claimant remained an employee and a worker of the respondent after 1 September 2021.
Timeline
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Employment commenced
The claimant started working for the respondent as an employee.
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Discussion about role change
Neil Bradbury informed the claimant that his job was at risk due to relationship breakdown with Polly Roach.
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Claimant emailed proposals
The claimant sent an email with proposals for a new working arrangement.
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Limited company set up
The claimant incorporated ST Care Consultancy Limited.
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Consultancy agreement started
The claimant began working under a consultancy agreement between his limited company and the respondent.
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Invoiced Bristol City Council
ST Care Consultancy Limited invoiced Bristol City Council for transition services.
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Invoiced NHS Kernow CCG
ST Care Consultancy Limited invoiced NHS Kernow CCG for transition services.
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Consultancy agreement terminated
The respondent terminated the consultancy agreement, alleging fundamental breach.
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New employment contract started
The claimant entered into a new contract of employment with the respondent.
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Employment terminated
The respondent terminated the claimant's employment with immediate effect.
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Claim presented
The claimant presented his claim to the employment tribunal.
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Preliminary hearing
The tribunal heard evidence and submissions on the claimant's employment status.
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Judgment issued
The tribunal found that the claimant was an employee and a worker as at 30 June 2022.
The legal issue
Whether a long-serving employee who began providing services through a limited company under a consultancy agreement could still be classed as an employee or worker for employment rights purposes.
The outcome
The tribunal decided that the claimant was both an employee and a worker as at 30 June 2022.
Key reasons:
- The claimant continued to do the same job for the same pay after the switch.
- The substitution clause in the consultancy agreement was never used and was not realistic given the nature of the work.
- There was sufficient mutuality of obligation and personal service to maintain an employment relationship.
No compensation was awarded at this stage—the preliminary hearing only determined employment status, so the substantive claims (unfair dismissal, notice pay, unauthorised deductions) will proceed.
Lessons & takeaways
- Changing to a consultancy agreement does not automatically break employment status—tribunals look at the reality of the working relationship.
- A substitution clause that is never used or is unrealistic will not prevent a finding of employment.
- Long service and unchanged duties are strong indicators that employment continues despite a change in contractual form.
- If you are considering moving to a limited company arrangement, seek legal advice on how it may affect your employment rights.
When a consultancy agreement doesn't change your employment status
This case shows that simply moving from an employment contract to a consultancy agreement through a limited company does not necessarily end your employment status. The claimant, a commissioning director with 24 years' service, had a difficult relationship with the managing director. To resolve this, he agreed to provide his services through his own limited company under a consultancy agreement. However, in practice, his duties, pay, and working arrangements remained almost identical.
The tribunal focused on the reality of the relationship, not just the paperwork. The substitution clause in the consultancy agreement was never invoked and was not realistic for the role. The claimant continued to perform personal service, and there was ongoing mutuality of obligation. These factors meant he remained an employee and a worker for employment law purposes.
What the respondent could have done differently
Bradbury House Limited could have avoided this outcome by ensuring the consultancy agreement genuinely reflected a different working relationship. For example, they could have allowed the claimant to send a substitute, changed his duties significantly, or removed the ongoing obligation to provide and accept work. Simply rebadging the same arrangement as a consultancy was not enough to change his legal status.
Why this matters for similar claims
This decision is a reminder that tribunals look beyond the contractual label to the substance of the relationship. Employees who are asked to switch to a limited company arrangement should be aware that their employment rights may still be protected. For employers, this case highlights the risks of using consultancy agreements to manage difficult relationships without genuinely changing the working practices.
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