Hall (Inspector of Taxes) v Lorimer

Court:Queen's Bench Division (Administrative Court)
Docket Number:CHRVF 92/0773/B
Judgment Date:05 Nov 1993
Jurisdiction:England & Wales
Neutral Citation:[1993] EWHC J1105-4

[1993] EWHC J1105-4




Before: Lord Justice Dillon Lord Justice Nolan Lord Justice Roch

CHRVF 92/0773/B

Brian Hall (HM Inspector of Taxes)
Ian Malcolm Lorimer

MR. P. GOLDSMITH QC and MR. L. HENDERSON (Instructed by The Solicitor of Inland Revenue, Somerset House, Strand, London WC2R 1LB) appeared on behalf of the Appellant

MR. S. ALLCOCK QC and MR. A. HITCHMOUGH (Instructed by Simmons & Simmons 14 Dominion Street, London EC2M 2RJ) appeared on behalf of the Respondent


(The stenograph notes of John Larking, Chancery House, 53-64 Chancery Lane, London WC2A 071-404 7464)


I will ask Nolan L.J. to give the first judgment.


This is an appeal by the Inland Revenue in the person of Mr. Hall, Her Majesty's Inspector of Taxes, against a decision of Mummery J. dismissing the appeal of the Revenue against a decision of a Special Commissioner. The Special Commissioner by that decision had upheld the appeal of Mr. Lorimer against assessments under Case 1 of Schedule E upon his earnings as a freelance vision mixer for the years 1984/85 to 1988/89 inclusive. Mr. Lorimer contends, and the Special Commissioner held, that those earnings were properly assessable not under Schedule E but under Schedule D. Case 1 of Schedule E imposes a charge of tax "in respect of any office or employment on emoluments there". The charge under Schedule D is imposed upon inter alia the profits "from any trade, profession or vocation". For the first four of the assessments the relevant charging provisions were contained in the Income and Corporation Taxes Act 1970. For the fifth they are in the corresponding Act of 1988. Nothing turns on that; the language is identical.


The case has been argued before us, as it was below, on the agreed basis that the critical issue is whether or not the contracts from which Mr. Lorimer derived his earnings were contracts of service. If so the earnings were properly assessed under Case 1 of Schedule E; if not they should be assessed under Schedule D.


The detailed facts of the matter which are so important in a case of this sort are set out with admirable thoroughness and clarity in the case stated by the learned Special Commissioner and in the documents attached thereto. I shall have to refer to some of the documents later in this judgment, but by way of introduction I cannot do better than adopt the summary of the facts given by Mummery J. in his judgment which was reported at (1992) 1 WLR 939. The summary begins at page 941 F and reads as follows:


"It appears from the facts found by the commissioner and set out in the case stated that the taxpayer, after a period in business on his own account and then in employment as an electrician, trained as a vision mixer in 1983. During his period of training and down to the end of January 1985 the taxpayer was employed by Molinare Ltd. as their one and only vision mixer in their business of producing television programmes. In 1985 the taxpayer decided to leave full-time employment with Molinare Ltd. and became a freelance vision mixer, doing work for a number of different production companies.


Vision mixing is undoubtedly a skilled editing job. It involves selecting, in the course of making both pre-recorded television programmes and live television programmes, camera shots taken from different angles which come up on screens in front of the mixer. The shots selected by the mixer determine what the viewer ultimately sees on his television screen at home. The vision mixer works closely with the director. He does not himself produce the film or television programme; he is one of many involved in the production. Others involved are the producer, director, musical director, cameramen, presenters, artistic directors, stagehands, electricians, engineers and so on. The production in which the vision mixing occurs usually takes place in a studio owned or hired by the production company. The studio is equipped with very expensive equipment owned or hired by the production company. The studio is equipped with very expensive equipment owned or supplied by the studio company, though the advice of the vision mixer may be sought on the equipment to be used in a particular production.


After he left full-time employment with Molinare Ltd. the taxpayer prepared a curriculum vitae. He made contact by letter, telephone and personal visits with many companies in the television industry with a view to obtaining engagements as a vision mixer. In the first 14 months he built up a list of 22 companies and in the three succeeding years the number on the list has remained at about 20. Some of the original names stayed on the list. New names were added. Most of the time was spent on engagements with a relatively small number of companies, though not always the same companies.


The taxpayer kept busy in what is a volatile industry. He worked for over 800 days in the period from 2 February 1985 to 5 April 1989. His annual number of engagements ranged from between 120 to 150. In the relevant period he had a total of about 580 engagements. Apart from three occasions when he worked as a technical director, a director and a transmission controller, all of the taxpayer's engagements were as a vision mixer. On six occasions when bookings clashed he provided, with the consent of the production company, a substitute hired at his expense for a sum less than he charged the production company, so that on those occasions he made a profit from the engagement.


The taxpayer has had no full-time or long term contract with any one company since he left Molinare Ltd. He has been free to accept engagements or not, as he wished, and the various production companies have been free to engage the taxpayer or not as they wished.


He takes bookings for periods of usually one to two days on a first come first served basis. The longest engagement was for 10 days. When he accepts an engagement the taxpayer goes to the studio and stays there until his part in the programme production has been satisfactorily completed. He does no other work for the company engaging him. Bookings are usually made on the phone to his home, where he has an office, and are subsequently confirmed by letter which often states the date, rate of pay, place of work and time. There are, however, no formal written conditions of engagement. Varying lump sum amounts are agreed and charged as reward for the work, sometimes with the addition of VAT. The taxpayer was registered for the purposes of VAT from 1 February 1985. Some clients are bad payers and keep him waiting for three months before they pay up. Some companies have deducted PAYE income tax or Class 1 national insurance contributions from the agreed payments. It appears that the taxpayer's charges are higher than the normal union rates of pay. For most of the relevant period the taxpayer was a member of a union, the Association of Cinematograph Television and Allied Technicians. All of the taxpayer's work as a vision mixer is done at the studios owned or hired by the production company on equipment owned or supplied by the studio company. The taxpayer does not provide any equipment or tools of his own. He does not contribute any money to the cost of the production of the programme. He does not share in the profits or run the risk of losses on the production. He does not hire any staff, either to assist him with his vision mixing at the production studio or at home, though his wife helped him with paperwork at home until their marriage was dissolved and he employed an agent for a few months from March 1989.


As to his financial arrangements, the taxpayer keeps a business account at his bank separate from his personal accountant. In January 1985 he effected a retirement annuity policy and a life assurance policy approved by the Revenue under the Income and Corporation Taxes Act 1970. In October 1986 he took out an insurance policy against sickness, providing income after four weeks of ill-health."


Before us Mr. Goldsmith QC, representing the Inland Revenue, made a concession which had not been made below. It was that tax could not be charged under Schedule E in respect of the profits made by Mr. Lorimer on the six occasions when, with the consent of the production company concerned, he provided a substitute to carry out the work for which he had contracted.


Mr. Goldsmith accepted that in those cases Mr. Lorimer could not be said to have earned his profit in the performance of a contract of service because in the result he was not paid for his own skill and labour. Mr. Goldsmith added, and I would agree, that the concession had no significant bearing on the proper classification of the other 574 engagements which Mr. Lorimer carried out during the 800 or more days on which he worked between 2 February and 5 April 1989.


Mr. Goldsmith submitted, and again I would agree, that the conclusion of the Special Commissioner on those other engagements was a conclusion of mixed law and fact. Therefore, it could only be disturbed on appeal if either the learned Special Commissioner had misdirected himself in law or the true and only reasonable conclusion on the facts found by him was inconsistent with his determination. The Revenue case before us as before Mummery J. was put forward primarily on the letter basis.


Mr. Goldsmith submitted that the most useful test to adopt in judging the reasonableness or otherwise of the Special Commissioner's decision was that stated by Cooke J. in Market Investigations Ltd v. Minister of Social Security (1969) 2 QB 173 at pages 184-5 when he said:


"The fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person...

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