Talentcore Ltd t/a Team Spirits
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 April 2010 |
| Neutral Citation | [2010] UKFTT 148 (TC) |
| Date | 01 April 2010 |
| Court | First Tier Tribunal (Tax Chamber) |
[2010] UKFTT 148 (TC)
John F Avery Jones CBE (Chairman)
Jeremy Woolf, counsel, instructed by David Craddock, for the Appellant
Adam Tolley, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
Agency workers - income tax and NICs - temporary staff for airport duty-free shops booked for a morning or afternoon shift - whether obligation to provide personal services - no because unfettered right of substitution - whether subject to, or to the right of, supervision, direction or control as to the manner in which he renders those services - yes - appeal allowed
The tribunal decided that workers supplied by the taxpayer agency to act as consultants in duty free shops at airports were not employees of the taxpayer where the workers had an unfettered right to substitution, even though they were subject to, or to the right of, supervision, direction or control as to the manner in which they rendered those services.
The taxpayer carried on the business of supplying individuals for counter and promotional work to major cosmetic companies at duty free shops at airports. It had a database of about 100 individuals referred to as consultants. The taxpayer supplied the consultants to the cosmetics companies by allocating work to them. There was no framework contract between the taxpayer and the consultants. The taxpayer was free to offer work to them or not, and they were free to accept or decline work when offered. There were no written contracts between the taxpayer and either the cosmetics companies (or World Duty Free which ran the duty-free shops) or the consultants.
The taxpayer trained consultants but engaged those who had the necessary experience. The taxpayer would telephone consultants offering work on particular days in the morning (8 am to 2 pm) or afternoon (3 pm to 9 pm) shift. If a consultant accepted, a contract was entered into for such work. A rota was prepared of the names of consultants and sent to the cosmetics company and the consultants. The consultant obtained a signature on his time sheet by either someone present from the cosmetics company or a manager from World Duty Free.
When working there was little supervision of the consultants and no control over sales techniques employed by consultants. Normally nobody from the cosmetics company would be managing the promotion; the counter staff working for the cosmetics company would be managing the counter and would not be supervising the promotion. World Duty Free as operator of the duty-free shop would be in a position to give directions to the consultants. For consultants not involved with promotions they would be working alongside staff of World Duty Free and would be subject to the same control as other staff. The cosmetics company was invoiced by the taxpayer by attaching a list of the people and time worked, and the consultants were paid in accordance with the time sheets. Consultants who were unable or unwilling to work for an agreed slot were expected to inform the taxpayer and if possible find a replacement.
The taxpayer appealed against assessments to tax under PAYE and NICs for the years 1998-99 to 2006-07 totalling £3,621,842.30, issued on the basis that the workers were employees of the taxpayer.
Whether ICTA 1988, Income and Corporation Taxes Act 1988 section 134s. 134 (applicable until 5 April 2003), ITEPA 2003, Income Tax (Earnings and Pensions) Act 2003 section 44s. 44 (applicable from 6 April 2003) and the Social Security (Categorisation of Earners) Regulations 1978, dealing with agency workers, which had the effect of deeming them to be employed by the agency for income tax and NICs, were applicable to the taxpayer.
The First-tier Tribunal (Dr John Avery Jones) (allowing the appeal) said that where there was a full right of substitution, which had the effect that the person need never turn up, there was no contract of service, but more limited rights of substitution did not prevent it. In the present case it could be inferred from the evidence that the taxpayer's primary concern was that every shift was covered, but which member of the team of consultants available to be asked covered it was of less concern, although it liked to avoid too many substitutions. Since the business consisted of filling a number of separate shifts with consultants on their database, who were free to accept the work or not in the first place, it could be inferred that the taxpayer was not concerned whether consultant A or consultant B accepted the offer of a particular shift. The usual objection to finding that there was an unfettered right of substitution, that if there was the person never need turn up to work, was not a material consideration where the contract was to work only a particular morning or afternoon shift. The taxpayer hoped that substitutions would not occur too frequently. What really mattered to the cosmetics company was that someone suitable was there for all shifts and that the time sheets were completed (Express v Echo Publications Ltd v Tanton[1999] ICR 693 distinguished; Macfarlane v Glasgow City Council [2001] IRLR 7 considered).
In this case, there was an unfettered right of substitution. Where the taxpayer had been informed in advance, which they preferred to be, there was a new contract made with the substitute consultant (through the agency of the first consultant if there was not direct agreement between the substitute and the taxpayer). But where the taxpayer was not informed and the first consultant paid the substitute the question arose whether there was a direct contract between the taxpayer and the substitute consultant. It was unlikely that there was such a contract since the taxpayer was unaware of the existence of the substitute. Given the temporary and ad hoc nature of the taxpayer's bookings the right of substitution would prevent there being a contract of service if that were in issue. Similarly it prevented there being an obligation to render (or provide) personal services within the applicable legislation.
On supervision, direction or control, while it seemed that that was actually minimal because the consultants were experienced and the cosmetics company was not in fact overseeing the promotions, the tribunal inferred that if a manager from the cosmetics company were present he or she would have a similar right to exercise supervision, direction or control over consultants as he or she would over other retail staff who were employees. Consultants working otherwise than on promotions were indistinguishable from other employees of World Duty Free or a cosmetics company with whom they were working and World Duty Free or the cosmetics company would have a similar right.
A further condition was that the worker had to be subject to, or to the right of, supervision, direction or control as to the manner in which he rendered those services. The legislation left it vague as to who had to (or had the right to) exercise such supervision, direction or control. It seemed that it was normally the client. The legislation dealt with workers who were obliged to provide services to the client and so normally it would be the client who needed to supervise, direct or control them. In this case it would not matter if the cosmetics company or World Duty Free exercised supervision, direction or control (or had the right to do so) as both were in the position of the client even if contractually the cosmetics company was the client. Either or both of them had the right to exercise that control even though in practice there was little or no exercise of such a right. There was no dispute about whether the worker was supplied by or through the taxpayer, or (for NICs) about the payment arrangements being satisfied. Accordingly there was no obligation to render (or provide) personal service(s) within the legislation.
1. Talentcore Limited trading as Team Spirits appeals against assessments to tax under PAYE and National Insurance Contributions for the years 1998-99 to 2006-07 totalling £3,621,842.30. The Appellant was represented by Mr Jeremy Woolf and the Respondents ("HMRC") by Mr Adam Tolley.
2. The issue in this appeal is whether the legislation dealing with agency workers, which has the effect of deeming them to be employed by the agency for income tax and NICs, is applicable to the Appellants.
3. It was an agreed fact that the Appellant's function is to supply individuals for counter and promotional work to major cosmetic companies at duty free shops at airports. It has a database of about 100 individuals referred to as consultants. The Appellant supplies the consultants to the cosmetics companies by allocating work to them.
4. I heard evidence from Ryta Ward (known professionally as Ryta Carr), managing director of the Appellant; Zuhaib Kasmani, and Edrisse Hussane, consultants working on cosmetics; and Dennis Twine and Catherine Twine, consultants working on customer service mainly in connection with alcohol sales, and find the following facts:
(2) There is no framework contract between the Appellant and the consultants. The Appellant is free to offer work to them or not, and they are free to accept or decline work when offered.
(3) There are no written contracts...
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...Act 2003 section 44s. 44. This was an appeal by HM Revenue and Customs (HMRC) against a decision of the First-tier Tribunal ([2010] UKFTT 148 (TC); [2010] TC 00454) giving rise to questions concerning the proper construction and application of the deeming provisions in the legislation that ......
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