Tibury Consulting Ltd v Margarat Gittins (HM Inspector of Taxes), SPC 00390

National Insurance – Earnings of workers supplied by service companies etc – Provision of services through intermediary – Company contracting to provide services of worker to independent information technology entity – Entity under contract to provide information technology services to UK motor manufacturer – Whether, if arrangements had taken the form of a contract between worker and motor manufacturer, worker would have been regarded as gainfully employed by the motor manufacturer – No – Appeal allowed - Social Security Contribution (Intermediaries) Regulations 2000, SI 2000/727, reg 6(1)(c)

TILBURY CONSULTING LTD

- and -

MARGARET GITTINS

Special Commissioner: STEPHEN OLIVER QC

Sitting in London on 14 and 15 October 2003

David Smith LLB, FTII of Accountax Consulting Ltd, for the Appellant

P J Death, Inspector of Taxes, for the Respondent

© CROWN COPYRIGHT 2003

1. Tilbury Consulting Ltd (“TCL”) appeals against the decision of Margaret Gittins, officer of the Board, made for national insurance contribution (NIC) purposes under regulation 6(4) of SI No.727 of 2000 and section 8(1)(m) of Social Security Contributions (Transfer of Functions etc) Act 1999. (SI 2000/727 is colloquially known as the Inland Revenue 35 legislation.) The decision was given on 28 January 2003 and reads as follows:

“1. That the circumstances of the arrangements between Roger Tilbury and Ford Motor Company for the performance of services from 1 August 2000 to 31 January 2002 are such that, had they taken the form of a contract between Roger Tilbury and Ford Motor Company, Roger Tilbury would be regarded for the purposes of Parts I and V of the Social Security (Contributions and Benefits) Act 1992 as employed in employed earner’s employment by Ford Motor Company.

2. That Tilbury Consulting Ltd is treated as liable to pay primary and secondary Class I contributions in respect of the worker’s attributable earnings from that engagement.”

Short summary of issues

2. In essence the legislation referred to above cover situations of individual workers who contract services via an intermediary to an end user client in circumstances that would amount to direct employment by that client if it were not for the interposition of that intermediary. Where the legislation applies, its effect is to treat the worker as employed, for NIC purposes, by the intermediary.

3. Throughout the period covered by the decision –

(i) Mr Roger Tilbury, referred to in the decision as “the worker”, was a controlling shareholder and director of TCL (the “intermediary”);

(ii) Mr Tilbury worked on an information technology (IT) project for Ford Motor Company (“Ford”, referred to as “the client” in the decision) and substantially all that work was done at Ford’s premises;

(iii) a company called Compuware Ltd (Compuware) was under contract with Ford to set up, service and staff that IT project and

(iv) TCL was engaged by Compuware to provide services and in particular to make available to Compuware Mr Tilbury’s services (with the right, subject to conditions, to provide a replacement).

4. The issue is whether, as the Officer of the Board has decided, Mr Tilbury would have been an employee of Ford in the circumstances of the assumed contract between Ford and Mr Tilbury the terms of which are to be inferred from the circumstances.

The statutory wording

5. The legislation, found in regulation 6 of SI 2000 No.727, applies and a worker will be treated as in employed earner’s employment by a client (i.e. gainfully employed under a contract service: see Social Security Contributions and Benefits Act 1992 section 2(1)) where:

“(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person (“the client”),

(b) the performance of those services by the worker is carried out, not under a contract directly between the client and the worker, but under arrangements involving an intermediary, and

(c) the circumstances are such that, had the arrangements taken the form of a contract between the worker and the client, the worker would be regarded for the purposes of Parts I to V of the Contributions and Benefits Act as employed in employed earner’s employment by the client”.

Introduction

6. The legislation calls for a two stage exercise. The first is to find the facts as they existed during the period covered by the decision. The facts to be found are those that serve to identify the “arrangements” involving the intermediary and the circumstances in which those arrangements existed and the nature of the services performed by the “worker”. The second is to assume that the worker (Mr Tilbury) was contracted to perform services to the client (Ford) and to determine whether in the light of the facts as found Mr Tilbury would be regarded as Ford’s employee.

The arrangements and the circumstances

7. The findings of fact are drawn from the oral evidence of:

Roger Tilbury, the “worker” in the decision appealed against.

Jim O’Neill, an employee of Ford, “the client”, and, at the material time, manager in charge of Ford’s Application Management Centre (“AMC”) explained below.

Christine Ansell, an employee of Compuware with responsibility for hiring Compuware’s employed staff and for engaging Compuware’s sub-contract staff.

Mr O’Neill was called to give evidence in line with the terms of the Explanatory Leaflet issued by the Special Commissioners. The leaflet states that since the question to be decided will be “whether the worker should be regarded as an employee of the client”, the Special Commissioners would expect to hear evidence from both the worker and from someone able to speak for the client.

8. Also in evidence were:

A “sub-contractor agreement” of 1 November 2000 between Compuware and TCL (referred to in this decision as “the Sub-Contractor Agreement”).

An agreement between the US parent companies of Ford and of Compuware dated 16 December 1998. It was not in dispute that the terms of this (referred to as “the Ford/Compuware Agreement”) governed the relationship between Ford and Compuware as regards the AMC project.

Background history

9. Throughout his working life Mr Tilbury has been involved with IT. He started as a programmer then moved into the development and writing of software. He now specializes in computer aided software engineering.

10. In 1994 he became a freelance contractor. He sought engagements through an independent entity called Computer People. Computer People made it a condition of their taking Mr Tilbury on their books that his services were provided through a limited company. The reason for this apparently was because otherwise Computer People would, under the then Inland Revenue legislation, have had to account for income tax and NIC on the payments for his services. Mr Tilbury caused TCL to be incorporated with himself as a director and his wife as company secretary.

11. From then on TCL engaged Mr Tilbury as an employee, issued its own invoices, and accounted for its own tax and national insurance liabilities. TCL effected insurances (a) to provide it with funds should Mr Tilbury be unavailable to work, (b) as PI...