Coffey (t/a Coffey Builders); Selvarajan
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 November 2011 |
| Neutral Citation | [2012] UKFTT 193 (TC) |
| Date | 04 November 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 193 (TC)
J. Blewitt (Judge), D. Robertson (Member)
Mr S Mokhtassi of Sterlin Partners LLP, appeared for the first Appellant, Mr Coffey T/A Coffey Builders
Mr A Smith appeared for the second Appellant, Dr Selvarajan
Mr I Birtles, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Whether first appellant was employed or self-employed in carrying out refurbishment of second appellant's medical clinic - whether second appellant was employer of first appellant or not - first appellant's appeal dismissed - second appellant not found to be employer
The First-tier Tribunal decided that the first taxpayer, with his knowledge and experience in the building industry, not to mention the responsibility inclusive of managing the project, was not an employee of the second taxpayer when he took on the job of refurbishing the medical clinic but was in fact self-employed as a builder, principal contractor or project manager.
The two taxpayers appealed the enquiry into the accounts and returns made by HMRC covering the tax years from 1998-99 to 2005-06 as against the first taxpayer and the years 2003-04 and 2005-06 against the second taxpayer. The first taxpayer alleged that during the tax years 2003-04 and 2005-06, he was an employee of the second taxpayer for the refurbishment done to the latter's medical clinic. The second taxpayer, whose assessment included an insurance contribution for and in behalf of the first taxpayer, also assailed such assessment and denied claims he was an employer of the first taxpayer.
The first taxpayer was a former partner in a building company until he retired due to ill health. After such retirement he took on one-off jobs as a self-employed builder. The second taxpayer was a medical practitioner who operated his own clinic. Sometime in 2003, the parties agreed to have that clinic refurbished and the construction was finished in the early part of 2006.
HMRC assessed the first taxpayer for the period covering the tax years from 1998-99 to 2005-06. They submitted that the returns made by the first taxpayer for the period covering the years 2003-04 and 2005-06 should be included in the partnership returns of the first taxpayer's company. This was because the work he carried out did not amount to his employment as an employee of the second taxpayer. HMRC also submitted that despite the first taxpayer's assertions, he did not relay his status of employment with the second taxpayer to his accountant.
The first taxpayer submitted that based on the conditions of his agreement with the second taxpayer, he was merely an employee. He explained that he oversaw the project of refurbishment and was treated as an employee by the second taxpayer. During the hearings, while he admitted to signing a contract as a principal contractor, he offered that he simply signed the documents offered by the second taxpayer.
The second taxpayer insisted that the first taxpayer was engaged on a commercial transaction basis and that he was not an employee of the second taxpayer. He presented himself as a witness and detailed the fact that he never had control of the first taxpayer when it came to the process of refurbishing the clinic.
(2) Whether the first taxpayer was employed or self-employed in carrying out refurbishment of the second taxpayer's medical clinic.
(3) Whether the second taxpayer employer of the first taxpayer.
A contract of service exists if the servant agrees in consideration of a wage or other remuneration to provide his or her own work and skill in the performance of some service for his or her master, the servant agrees expressly or impliedly that in the performance of the service, he or she will be subject to the control of the other party sufficiently to make that party the master, and the other provisions of the contract are consistent with its being a contract of service. Control includes a part 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 when it shall be done (Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National InsuranceTAX[2010] BTC 49 considered).
The Tribunal in this case concluded that the first taxpayer was not an employee of the second taxpayer and was in fact self-employed. While the evidence offered by both parties conflicted, the Tribunal on the balance of probabilities found the testimony of the second taxpayer credible. It accepted the second taxpayer's evidence that as a medical practitioner, he simply did not have the relevant knowledge or experience to control such aspects of the project as finding labourers or fixing their rate of pay. It gave credence to the fact that the second taxpayer had not directed the first taxpayer in his task nor subjected to appraisal or monitoring. It concluded that the first taxpayer had control over the building project.
The Tribunal also noted that the documents signed by the first taxpayer carried with it significant responsibilities and control. It rejected the said taxpayer's argument that he signed the same without checking its contents. While the Tribunal noted that the document was signed after the commencement of the project, it was relevant as it provided an indication as to the intentions and standpoint of the parties, as the first taxpayer signed his name under which titles as principal contractor and planning supervisor was pre-printed. Taken with his knowledge of the building industry, the Tribunal found that the first taxpayer's role went beyond overseeing the project.
The Tribunal ruled that the first taxpayer, the experienced builder, had a significant degree of control over the project. It did not accept that the second taxpayer, who continued to work as a medical practitioner throughout the project, had either the time or knowledge to dictate how, when or with which labourers the project should be carried out; indeed had he had such knowledge and experience, the role of the first taxpayer would have been redundant. Whatever description given to the first taxpayer's role, be it builder, principal contractor or project manager, the Tribunal decided that it could not be said, on any view, that he was an employee of the second taxpayer.
The Tribunal confirmed, in respect to the second taxpayer's appeal, that the first taxpayer, acted in his capacity as a self-employed partner of a building company and that the second taxpayer was not his employer.
1.In order to fully understand the nature of the appeals before the Tribunal, it is, in our view, necessary to set out a brief summary of the undisputed background to this case.
2.Mr Coffey was, for many years, a partner in Coffey Builders until his retirement due to ill health. Coffey Builders had a business address of Brownstones Cottages, Old Colliers Row, Smithhills Deane, Bolton.
3.Dr Selvarajan is a GP who practices from Deane Clinic, Horsefield Street, Bolton ("the clinic").
4.In 2003 plans were submitted and approved for the refurbishment of Deane Clinic. It was agreed by all parties that Dr Selvarajan had made contact with Mr Coffey as a result of Mr Coffey's daughter, a medical representative, having visited the clinic during the course of her business and providing her father's details to Dr Selvarajan.
5.During the period of the tax years 2003-2004 and 2005-2006 Mr Coffey had been involved in the refurbishment of the clinic.
6.On 13 January 2006, HMRC opened an enquiry into the accounts and returns of Coffey Builders, covering the tax years from 1998-1999 to 2005-2006 inclusive. HMRC maintain that additional amounts of tax are due for each of the years covered by the enquiry.
7.HMRC has also issued calculations under Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8Section 8 of the Social Security (Transfer of Functions etc) Act 1999 for the years 2003-2004 and 2005-2006 to Dr Selvarajan. In respect of NIC Primary and Secondary contributions, HMRC calculated the amounts as nil but issued a decision notice in order that Dr Selvarajan could lodge his appeal.
8.The basis of the assessments raised by HMRC against Mr Coffey and NIC decision notice against Dr Selvarajan, in respect of the tax years 2003-2004 and 2005-2006, relies on the status of the working relationship between Mr Coffey and Dr Selvarajan.
9.HMRC's case is that Mr Coffey's engagement on the building work carried out at the clinic did not amount to his employment as an employee of Dr Selvarajan and that the work undertaken by Mr Coffey should have been included in the partnership returns of Coffey Builders.
10.Mr Coffey maintains that he was employed by Dr Selvarajan and should be regarded as an employee.
11.Dr Selvarajan's case is that Mr Coffey was engaged on a commercial transaction basis and that not only was he not an employee of Dr Selvarajan but furthermore, that the employment status of Mr Coffey is irrelevant.
12.We clarified with HMRC and the first Appellant that although assessments have been issued by HMRC to Mr Coffey and figures were contained within the documentation provided to us, the sole issue for us to determine related to the status of the relationship between Mr Coffey and Dr Selvarajan. We were informed that no Closure Notice has yet been issued in respect of the enquiry and consequently all parties agreed that the amount of the assessments raised against Mr Coffey were not the subject of this appeal. We were invited by Mr Mokhtassi for the first Appellant to conclude that Mr Coffey was an employee of Dr Selvarajan.
13.As regards the second Appellant, HMRC issued a Social Security Contributions (Transfer of Functions,...
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