Oriel Support Limited v Her Majesty's Revenue & Customs, V 20930
| Jurisdiction | UK Non-devolved |
| Judge | John CLARK |
| Judgment Date | 20 January 2009 |
| Respondent | Her Majesty's Revenue & Customs |
| Appellant | Oriel Support Limited |
| Reference | V 20930 |
| Court | First-tier Tribunal (Tax Chamber) |
20930
VAT – supplies of services – whether services of workers supplied by trader providing outsourcing service or by employment agencies using that service – the latter – appeal dismissed
ORIEL SUPPORT LIMITED Appellant
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Tribunal: JOHN CLARK (Chairman)
RAY BATTERSBY
Sitting in public in London on 29-30 September, 1-2 October and 4-5 November 2008
Eamon Mc Nicholas of counsel, instructed by bnb Tax Consultants, for the Appellant
Peter Mantle of counsel, instructed by the Solicitor for Her Majesty’s Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2009
DECISION
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Oriel Support Ltd (referred to in this decision as “OSL”) appeals against two decisions taken by the Respondents (“HMRC”). One was contained in HMRC’s letter to OSL dated 8 December 2006. The other was contained in HMRC’s letter dated 7 December 2006 to another company, UK Labour Ltd. The decision in both letters was that OSL did not make supplies of staff to customers. The letter dated 8 December 2006 also indicated that the invoice presently supplied to employment agencies for payroll could not be treated as a supply for VAT purposes as no supply was made, therefore OSL could not charge VAT on this invoice.
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The text of the Statement of Agreed Facts is set out below, subject to minor editorial changes. In addition we were provided with a number of bundles of documents, including witness statements from Brian Pursey, Mrs Susan Copley and Anthony Borman on behalf of OSL and Christopher Wells and Miss Elinor Crockford on behalf of HMRC. Mr Pursey, Mrs Copley, Mr Wells and Ms Crockford also gave oral evidence. We set out additional findings of fact after the Statement, and where appropriate we consider disputed facts later in this decision.
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OSL is a limited company, incorporated in England & Wales on 3 December 2004 under company number 5304654.
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On 21 April 2005, OSL applied to HMRC to be registered for VAT, with effect from 1 May 2005. The VAT 1 was signed by Brian Pursey, a director OSL was subsequently registered for VAT with effect from 1 May 2005.
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On 12 January 2006, Miss Elinor Crockford of HMRC visited OSL to enquire into its VAT declarations. Miss Crockford was an officer of HMRC’s Labour Providers team, based at Swindon VAT office, dealing in particular with tax and VAT issues in the employment industry. At that visit OSL provided Miss Crockford with a copy of a document which was referred to by OSL as a ‘Complete Financial Outsourcing’ agreement (‘CFO’).
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The CFO referred to an ‘Operating Manual’, a manual produced by OSL.
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OSL invoiced end users of the services of the workers for the price of the labour provided to the end users and VAT was calculated and charged to the end users by reference to that price.
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Further visits to OSL were made by Miss Crockford during 2006. HMRC formed the view that OSL and the employment agencies that had contracted with it were accounting for VAT incorrectly.
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During November and December 2006, Christopher Wells, an officer of HMRC in the Labour Providers team based at Harlow VAT office, interviewed directors of three employment agencies – Technical Moves Ltd, Bespoke Recruitment Ltd and UK Labour Ltd – who used OSL’s services.
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On 7 December 2006, Mr Wells sent a ruling letter to UK Labour Ltd, an employment agency which had contracted with OSL, in which he set out decisions made by HMRC as recorded in that letter.
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On 8 December 2006, Miss Crockford sent a ruling letter to OSL in which she set out decisions made by HMRC in relation to OSL, as recorded in that letter.
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On 20 December 2006, OSL appealed against Miss Crockford’s decisions, notified by her letter dated 8 December 2006, and Mr Wells’ decisions in relation to UK Labour Ltd, notified by his letter dated 7 December 2006.
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In the course of the hearing, OSL and HMRC adopted a set of agreed terms to describe the parties involved in the various contracts under review. These were:
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The Customer, namely the end user of the services provided;
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OSL;
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The Agent, ie the employment agency or similar entity. [Note that we do not consider that the use of this term is in any way determinative of the capacity in which the Agent acts, so that this may be either as principal or agent, depending on the effects of the relevant contractual documentation];
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The Worker, who could be an employee of the Agent, a self-employed individual, or an individual provided through a “personal service company”.
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A significant proportion of the evidence related to the manner in which HMRC had arrived at the respective decisions. In the course of the hearing, the parties agreed that it was not necessary to review this process, which had been examined in other proceedings, and that we should concentrate on the terms of the contractual relationships between the various persons involved, and the nature of the supplies made.
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There were no agreed sample documents. We were provided with examples of documentation. We set out below our description based on those examples. The evidence showed that there were two possible sets of circumstances in which OSL became involved. In some cases, the Agent was starting up its business, and entered into a contractual relationship with OSL as part of the process of commencing business. In others, the Agent had a pre-existing business, with the three parties to existing contracts being the Agent, the Worker and the Customer; in those cases, the relationship with OSL was added to those existing contractual relationships. Mr Pursey’s evidence was that currently, ie in 2008, there were 130 Agents with CFOs, and that probably about a quarter, say 30, had had a pre-existing client book.
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With some modifications based on the other evidence, we set out Mr Pursey’s description of the way in which the arrangements worked. (We comment below on the effects of the contractual arrangements, so at this point we merely reproduce his views as to those effects, without indicating whether we agree or disagree with those views.) The Agent, acting as a disclosed agent of OSL, identified new Customers. It them referred their details to OSL which in turn determined whether it was prepared to enter into a contract with each of those Customers. If a Customer was approved, the Agent would enter into a contract for the supply of labour as a disclosed agent of OSL, on the basis of the latter’s Standard Terms and Conditions, together with such of the Agent’s own standard terms and conditions as were not inconsistent with those of OSL. The CFO required that the Agent disclosed to the Customer the contractual relationship between the parties. This confirmation was required as part of the “Client Application Form” signed by the Customer.
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The Agent employed some individual Workers and engaged the services of others through service companies.
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The Worker worked at the premises of the Customer and filled in a time sheet. This was provided to the Customer, who signed it and returned it to OSL. OSL then raised an invoice against the Customer in OSL’s own name, but disclosed the logo of the Agent. These invoices had OSL’s Standard Terms and Conditions on their reverse side.
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The sums due under the supply agreement were due solely to OSL. The credit risk associated with the contract was covered by OSL’s credit risk insurance, as shown in the Credit Insurance Schedule to the CFO indicating the Agent’s name, and specifying the “prepayment level cover percentage”, and the “first loss excess on each debtor balance”.
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Under the sub-contract agreement between OSL and the Agent, the latter was entitled to a fee (“ the Contract Fee”) for its work equal to the amount...
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