R & C Commissioners v Oriel Support Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moses,Lord Justice Keene,Sir Anthony Clarke |
| Judgment Date | 24 February 2009 |
| Neutral Citation | [2009] EWCA Civ 401 |
| Docket Number | Case No: C1/2008/1581; 1581(A) |
| Court | Court of Appeal (Civil Division) |
| Date | 24 February 2009 |
[2009] EWCA Civ 401
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
(MR KENNETH PARKER QC)
The Master of the Rolls
(sir Anthony Clarke)
Lord Justice Keene and
Lord Justice Moses
Case No: C1/2008/1581; 1581(A)
Mr J Walters QC, Mr L Sykes and Mr N Ashton (instructed by Bevan Brittan) appeared on behalf of the Appellant.
Mr P Mantle (instructed by the Solicitor's Office) appeared on behalf of the Respondent.
(As Approved)
Lord Justice Moses:
The decision impugned before Mr Kenneth Parker QC, sitting as a deputy High Court judge, was a decision of the Revenue contained in a letter dated 8 December 2006. This required that the appellant, Oriel Support Ltd (“Oriel”), should remit PAYE due for each of its customers under what the Revenue described as “consultancies”, under individual PAYE references for each consultancy and not under its own PAYE reference. Mr Kenneth Parker QC, in a judgment reported at [2008] EWHC 1304 Admin, upheld the decision and declined to accept the challenge advanced by Oriel that the Revenue had no statutory authority for making such a requirement. The reason why Oriel sought to use its own reference is not a reason which illuminates the correctness or otherwise of Mr Parker's decision but I observe that it was hoped to offset withholdings made by a number of end users from payments made to Oriel.
The background of the argument has been carefully and fully explained by the deputy High Court judge. The judge explains that labour providers are in the business of providing workers to end users, who will use such workers either in the long or short term in their own operations. The appellant, Oriel, provides a complete financial outsourcing for labour providers who are the clients of Oriel. Amongst the services provided by Oriel under a complete financial outsourcing contract is the processing of pay for each worker, with deductions of tax and the employee's National Insurance contributions. It is in those circumstances that Oriel contend it is entitled to use its own reference number.
It is important to observe that the labour provider is the only body which enters into contracts with the workers whose labour will be made available to the end users through the labour provider. The labour provider contracts with end users for the supply to them of the labour of those workers under contract to the labour provider. The workers themselves enter into a contract to provide their personal services to the labour provider. They do so in two ways: either they provide those services under contracts of employment or they provide them by virtue of an agency arrangement.
It is in that context that the judge—in my judgment accurately—identifies how the wages and the deductions are made. At paragraph 47 he emphasises that the payments of wages to the workers are at the expense of the labour provider. Under invoicing arrangements between Oriel and the labour provider, Oriel recharges to the labour provider the expense of payments made by Oriel to the employees of the labour provider so that, as the judge puts it, in the final analysis the labour provider “bears the cost of the payments to its employees”. The precise mechanism, for anyone who is interested, is set out in full in paragraph 47 of his judgment.
It is in that factual context, as to which there is no dispute, that it is necessary to turn to the relevant statutory and regulatory provisions. By section 4 of the Income Tax Earnings and Pensions Act 2003 (“the 2003 Act”), under the rubric “'Employment' for the purposes of the employment income Parts”:
“(1) In the employment income Parts “employment” includes in particular –
(a) any employment under a contract of service,
…
(2) In those Parts “employed”, “employee” and “employer” have corresponding meanings.”
Some of the workers providing personal services to the labour provider who the labour provider supplied to end users, work under a contract of service and are thus employees within the meaning of section 4 of the 2003 Act. But not all the workers work under a contract of service as provided within section 4. Some workers fall within the provisions of section 44 of the 2003 Act, which provides, under the rubric “Treatment of workers supplied by agencies”:
“(1) This section applies if—
(a) an individual (“the worker”) personally provides, or is under an obligation personally to provide, services (which are not excluded services) to another person (“the client”),
(b) the services are supplied by or through a third person (“the agency”) under the terms of an agency contract,
(c) the worker is subject to (or to the right of) supervision, direction or control as to the manner in which the services are provided, and
(d) remuneration receivable under or in consequence of the agency contract does not constitute employment income of the worker apart from this Chapter.
(2) If this section applies—
(a) the services which the worker provides, or is obliged to provide, to the client under the agency contract are to be treated for income tax purposes as duties of an employment held by the worker with the agency, and
(b) all remuneration receivable under or in consequence of the agency contract (including remuneration which the client pays or provides in relation to the services) is to be treated for income tax purposes as earnings from that employment.”
Section 47 is an interpretation section which provides, by subsection (1), that:
“agency contract” means a contract made between the worker and the agency under the terms of which the worker is obliged to personally provide services to the client.”
In the instant appeal, there is no dispute but that the worker personally provides, or is under an obligation personally to provide, services to the end user and that the services are supplied through a third person under the terms of an agency contract, namely the labour provider.
The relevance of those provisions to the payment of PAYE income can be seen in the provisions of the regulations made under the Act, the Income Tax (Pay As You Earn) Regulations 2003/2682 (“the 2003 Regulations”) By Regulation 21(1):
“On making a relevant payment to an employee during a tax year, an employer must deduct or repay tax in accordance with these Regulations by reference to the employee's...
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