Christianuyi Ltd and Others v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Marcus Smith,Judge Herrington |
| Neutral Citation | [2018] UKUT 0010 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,19 January 2018 |
| Date | 19 January 2018 |
| Published date | 19 January 2018 |
[2018] UKUT 0010 (TCC)
Appeal number: UT/2016/0131
INCOME TAX – whether appellants were “managed service companies” –
s.61B(2) Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) –
whether a managed service company provider was “involved” with the
appellants – whether the provider “benefits financially” from the provision
of services – the meaning of “influences or controls”
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
(1) CHRISTIANUYI LIMITED
(2) FANNING SOCIAL CARE LIMITED
(3) HADDASSAH LIMITED
(4) DR. JACEK TRZASKI LIMITED
(5) JONNY TOOZE PHYSIOTHERAPY SERVICES
LIMITED
Appellants
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
The Honourable Mr. Justice Marcus Smith
Judge Timothy Herrington
Sitting in public at The Rolls Building, Fetter Lane, London EC4A 1NL on 27, 28
and 29 November 2017
Giles Goodfellow, Q.C. and Ben Elliott, instructed by Mazars LLP, accountants,
for the Appellants
Akash Nawbatt, Q.C. and Kate Balmer, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2018
DECISION
A. INTRODUCTION
1. Section 61B(1) of the Income Tax (Earnings and Pensions) Act 2003
(“ITEPA”) defines a “managed service company” in the following terms: 5
“(1) A company is a “managed service company” if-
(a) its business consists wholly or mainly of providing (directly or
indirectly) the services of an individual to other persons,
(b) payments are made (directly or indirectly) to the individual (or
associates of the individual) of an amount equal to the greater part 10 or all of the consideration for the provision of the services,
(c) the way in which those payments are made would result in the
individual (or associates) receiving payments of an amount (net of
tax and national insurance) exceeding that which would be received
(net of tax and national insurance) if every payment in respect of the 15 services were employment income of the individual, and
(d) a person who carries on a business of promoting or facilitating the
use of companies to provide the services of individuals (“an MSC
provider”) is involved with the company.
2. For the last of these conditions – contained in section 61B(1)(d) – to be 20 met, two requirements have to be satisfied:
(1) First, a person must be “involved with the company”. The notion of
involvement is defined in section 61B(2) of ITEPA, which provides:
“(2) An MSC provider is “involved with the company” if the
MSC provider or an associate of the MSC provider- 25
(a) benefits financially on an ongoing basis from the
provision of the services of the individual,
(b) influences or controls the provision of those
services,
(c) influences or controls the way in which 30 payments to the individual (or associates of the
individual) are made,
(d) influences or controls the company’s finances or
any of its activities, or
(e) gives or promotes an undertaking to make good 35 any tax loss.
3
(3) A person does not fall within subsection (1)(d) merely by
virtue of providing legal or accountancy services in a
professional capacity.
(4) A person does not fall within subsection (1)(d) merely be
virtue of carrying on a business consisting only of placing 5 individuals with persons who wish to obtain their services
(including by contracting with companies which provide their
services).
(5) Subsection (4) does not apply if the person or an associate of
the person- 10
(a) does anything within subsection (2)(c) or (e), or
(b) does anything within subsection (2)(d) other
than influencing the company’s finances or
activities by doing anything within subsection
(2)(b).” 15
(2) Secondly, that person must be an “MSC provider”, as that term is
defined in section 61B(1)(d), set out in paragraph 1 above.
3. The consequence of a company being a “managed service company” is
that liability to income tax and national insurance contributions (“NICs”)
will arise on the part of the managed service company in respect of 20 payments that have been received by the relevant individual whose
services were provided by the managed service company.
4. By a decision released on 21 April 2016 (the “Decision”), the First-tier
Tribunal (Tax Chamber) (“FTT”) upheld various determinations to
income tax under regulation 80 of the Income Tax (PAYE) Regulations 25 2003 and various notices of decision as to liability to national insurance
contributions under section 8 of the Social Security Contributions
(Transfer of Functions, etc) Act 1999. There was one determination and
one notice of decision in the case of each of the five Appellants. The
determinations and notices of decision were made for the tax years 2007-30 2008 to 2009-2010.
5. The determinations and notices of decision were made on the basis that
the Appellants were managed service companies within the meaning of
section 61B of ITEPA. As to this:
(1) It was common ground before the FTT,1 and was common ground 35 before us, that the Appellants are all companies satisfying the
requirements of sections 61B(1)(a), (b) and (c).
1 Decision at [12].
To continue reading
Request your trial