Talentcore Ltd (t/a Team Spirits) v HM Revenue and Customs

JurisdictionUK Non-devolved
CourtUpper Tribunal (Tax and Chancery Chamber)
Judgment Date14 October 2011
Neutral Citation[2011] UKUT 423 (TCC)
Date14 October 2011

[2011] UKUT 423 (TCC).

Upper Tribunal (Tax and Chancery Chamber).

Roth J.

Revenue and Customs Commissioners
Talentcore Ltd (t/a Team Spirits)

Adam Tolley and Kate Balmer (instructed by the Solicitor to HM Revenue and Customs) for the appellants.

Jeremy Woolf (instructed by David Jones & Co (accountants)) for the respondent.

The following cases were referred to in the judgment:

Byrne Bros (Formwork) Ltd v Baird ICR[2002] ICR 667

Edwards v Bairstow ELRTAX[1956] AC 14; 36 TC 207

Express & Echo Publications Ltd v Tanton ICR[1999] ICR 693

IR Commrs v McGuckian TAXWLR[1997] BTC 346; [1997] 1 WLR 991

James v Redcats (Brands) Ltd ICR[2007] ICR 1006

Kirkness v John Hudson & Co Ltd ELR[1955] AC 696

Omar Parks Ltd v Elkington WLR[1992] 1 WLR 1270

Procter & Gamble UK v R & C Commrs VAT[2009] BVC 461

R (on the application of Westminster City Council) v National Asylum Support Service UNKUNK[2002] UKHL 38; [2002] 4 All ER 654

Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance TAXELR[2010] BTC 49; [1968] 2 QB 497

R & C Commrs v Valentine Marketing Holdings Ltd UNKTAX[2006] EWHC 2820 (Ch); [2009] BTC 106

Income tax - National Insurance contributions - Agency workers - Whether obliged to provide personal services - Right of substitution - Supervision and control - Income and Corporation Taxes Act 1988, Income and Corporation Taxes Act 1988 section 134s. 134 - Income Tax (Earnings and Pensions) Act 2003, Income Tax (Earnings and Pensions) 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 applied to "agency workers" for the purposes of PAYE and National Insurance contributions.

The taxpayer company was engaged in the supply of individuals to major cosmetic companies for counter and promotional work at airport duty-free shops. It had a database of about 100 individuals, who were referred to as consultants. The duty-free shops were run by World Duty Free and Talentcore also supplied consultants to World Duty Free directly to assist in the normal operation of its duty-free shops. 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 or the consultants. The taxpayer would telephone consultants offering work on particular days in the morning or afternoon. 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 obtains 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. The taxpayer engaged consultants who had the necessary experience. World Duty Free as operator of the duty-free shop was in a position to give directions to the consultants. 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 PAYE tax and National Insurance contributions (NICs) for the years 1998-99 to 2006-07 made on the basis that the legislation dealing with agency workers had the effect of deeming the consultants to be employed by the taxpayer. The relevant tax legislation was contained in the Income and Corporation Taxes Act 1988, s. 134 and then the Income Tax (Earnings and Pensions) Act 2003, s. 44-47. The legislation relevant to NICs was the Social Security (Categorisation of Earners) Regulations 1978. It was common ground that "render" in ICTA 1988 and the 1978 Regulations had the same meaning as "provide" in ITEPA. Accordingly, none of the legislative provisions would apply if the individual was not (a) providing, or under an obligation to provide, personal services; or (b) subject to (or to the right of) supervision, direction or control as to the manner in which those services were provided. The FTT found that the second of those conditions was satisfied but held that the first was not. It therefore allowed the taxpayer's appeal.

Held, dismissing HMRC's appeal:

1.The issue concerning an obligation to provide personal service or services turned on the question of the consultant's right of substitution. The effect of the authorities was that a full right of substitution which had the effect that the person need never turn up meant that there was no contract of service, but more limited rights of substitution did not prevent it. It was clearly open to the FTT on the evidence to find that there was an unfettered right of substitution. In the present case, there was no framework contract and each (oral) contract was for a specific shift. On the FTT's interpretation of those contracts, they gave the consultant the freedom to arrange for another to work that shift if he did not wish to do so. In effect, the consultant's basic obligation was to ensure that the shift was covered, either by himself or a suitable substitute. The fact that the original consultant had complete freedom to arrange for a substitute if he wished, even if he did not actually do so, constituted an unfettered right of substitution, as found by the FTT. The right of substitution prevented there being an obligation to render or provide personal services within the applicable legislation.

2.The tribunal rejected the argument that even if the contract did not oblige the consultant to perform the service personally, when the consultant did the work he or she assumed an obligation to do it personally. Even if that were the correct analysis, it did not satisfy the statutory conditions. The focus of the legislative definition of an "agency contract" was on the terms of the contract. The contract was entered into before the consultant started to work the shift to which it related, possibly days or weeks beforehand, and it was not replaced by a new and different contract once the consultant started his shift. How the contract was performed did not alter its terms. Since the FTT held correctly that the terms of the contract did not oblige the consultant to provide the services personally, it was not an agency contract for the purposes of the legislation.

3.The tribunal rejected the taxpayer's appeal against the FTT's finding in relation to supervision and control. The FTT's finding was derived from an assessment of the primary facts. That evaluation could not be successfully challenged on appeal in the absence of any error of principle.


1.This is an appeal by Her Majesty's Revenue and Customs (HMRC) brought with permission granted by the First-tier Tribunal (FTT) against its decision (the Decision) allowing the appeal by the Respondent (Talentcore) against the assessments to tax under PAYE and National Insurance contributions (NICs) for the years 1998-99 to 2006-07 (see [2010] UKFTT 148 (TC); [2010] TC 00454). The appeal gives rise to questions concerning the proper construction of the deeming provisions in the governing legislation that apply to what may be broadly described as "agency workers"; and the application of those provisions to the facts of this case.

The facts

2.Talentcore, which trades under the name "Team Spirits", is engaged in the supply of individuals to major cosmetic companies for counter and promotional work at airport duty-free shops. It has a database of about 100 individuals, who are referred to as "consultants". The duty-free shops are run by World Duty Free and it seems that Talentcore also supplies consultants to World Duty Free directly to assist in the normal operation of their duty-free shops.

3.Having heard evidence from Mrs Ryta Carr, who runs Talentcore, and from four of the consultants, the FTT made the following findings of fact at para. 4 of the Decision:

  1. (2) There is no framework contract between [Talentcore] and the consultants. [Talentcore] is free to offer work to them or not, and they are free to accept or decline work when offered.

  2. (3) There are no written contracts between [Talentcore] and either the cosmetics companies (or World Duty Free which runs the duty-free shops) or the consultants.

  3. (4) Mrs Carr is well known to the cosmetics companies having worked with them for 20 years. Through [Talentcore] she has built up a business of providing experienced consultants for work in duty-free shops. Cosmetic companies will obtain a three-week slot for promotions in the duty-free shop which take place from a position, described as a gondola, separate from the normal cosmetics counters. About 70% of [Talentcore's] work is to find consultants to service such promotions by selling the product being promoted. The remainder of [Talentcore's] work is to fill vacancies for work on the counter in normal duty-free shopping areas, whether relating to cosmetics or alcohol, including sometimes, though not normally, operating the till.

  4. (5) Talentcore does not train consultants but engages those who have the necessary experience. Prospective consultants are interviewed. During the interview Mrs Carr will explain the dress code which is set out in a document entitled "Members code of practice" of which there are versions 1 and 2 but Mrs Carr did not remember the date of change. The document is not normally handed to consultants but is used by Mrs Carr as the basis for interviews, but might occasionally be handed to a consultant who was not sure about something. It emphasises punctuality and...

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