SHERBURN AERO CLUB LTD v REVENUE & CUSTOMS COMMISSIONERS (SpC TC00006) (2009)

 (full text)

[2009] UKFTT 65 (TC)

 

Sp Comm (John Clark) 30/3/2009

 

EMPLOYMENT - TAX

 

CONTROL : EMPLOYMENT STATUS : INCOME TAX : INDEPENDENT CONTRACTORS : MUTUALITY OF OBLIGATION : NATIONAL INSURANCE CONTRIBUTIONS : PILOTS : EMPLOYMENT STATUS OF FLYING INSTRUCTORS ENGAGED BY FLYING CLUB

 

A flying club which engaged flying instructors but had no control over the way in which their work was carried out was not their employer for the purposes of income tax and national insurance legislation.

 

The appellant flying club (S) appealed against the respondent commissioners' decisions that instructors working for S were employees for the purposes of income tax and national insurance contributions.

 

S had previously declared that all instructors were engaged on a self-employed basis.

 

Instructors were vetted by S to ensure they were suitably qualified.

 

Under the terms of their engagement, the instructors had to notify S in advance of the dates when they would be able to provide instruction, but they were not always required to work on those days.

 

In addition, an instructor could later change his mind and cancel at short notice.

 

If S cancelled lessons, for example due to weather conditions, there would be no payment to the instructors for the slots cancelled.

 

The instructors gave lessons in aircraft owned by S, during which they had to follow a syllabus laid down by the Civil Aviation Authority (CAA) and orders set out in S's Flying Order Book.

 

They did not, however, consider that S could tell them how to instruct and, subject to restrictions in the Flying Order Book, instructors had complete freedom to decide where to fly.

 

Instructors did not receive holiday pay, sick pay or other "employee style benefits" and were free to work elsewhere.

 

S submitted that on the basis of the evidence as a whole, there was a clear lack of mutuality of obligations, personal service and control for there to be a contract of service.

 

HELD:

 

(1) The irreducible minimum for a contract of employment to exist was confined to the question of mutuality, Nethermere (St Neots) Ltd v Gardiner (1984) ICR 612 CA (Civ Div) and Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968) 2 QB 497 QBD applied.

 

However, an ongoing relationship was not required and the question of mutuality was confined to the nature of the relationship when the worker was actually working for the engager.

 

In the instant case, the mutuality condition was met in respect of the individual engagements actually undertaken by the instructors.

 

Their choice as to whether to accept further engagements and S's choice as to whether to offer them further engagements, was not relevant in determining whether the condition was met in relation to each specific engagement, Littlewood (t/a JL Window & Door Services) v Revenue and Customs Commissioners (2009) STC (SCD) 243 Sp Comm applied.

 

Whilst the other factors set out in Ready Mixed Concrete of personal service, control and other provisions of the contract were not part of the irreducible minimum; that did not mean that their importance was diminished, and it remained necessary to examine the facts against each of those conditions.

 

(2) The "personal service" element of the Ready Mixed Concrete test was also fulfilled.

 

S's need to ensure that any person providing instruction to its members had the appropriate level of qualifications meant that the engagements had to be personal.

 

(3) The "control" condition in Ready Mixed Concrete was not fulfilled for the following reasons:

 

(a) S was not in a position to dictate to instructors what work needed to be done.  Although it could request that an instructor change a lesson booking, for example to provide specialist training, the instructor could withdraw from the booking if he decided that the change put him at a disadvantage;

 

(b) S had no control over the way in which the instructors did their work.   Instructors could decide the precise order in which the elements of the CAA syllabus were taught and could decide whether ground briefings were required instead;

 

(c) the obligations imposed on the instructors under the Flying Order Book applied to everyone using the airfield and could not be seen as control in the sense referred to in Ready Mixed Concrete, which required such control to be a specific feature of the relationship in question;

 

(d) S had no control over the means to be employed by the instructors in carrying out their work or the place where their work should be done;

 

(e) there was flexibility on both sides; work was not guaranteed by S and instructors could cancel lessons.  The decision as to lesson allocation therefore became a decision as to whether a contract would be entered into in respect of a lesson at a particular time, rather than a decision by S as to the time when the instructor was to carry out work under the terms of an agreed contract.  Therefore, it could not be said that S had control of the time when the work should be done.

 

(4) The dealings between S and the instructors did not appear to be consistent with the contracts being contracts of service.

 

Accordingly, not all of the conditions in Ready Mixed Concrete had been fulfilled and on that basis the engagements between the instructors and S were contracts for services.

 

Appeal allowed

 

Counsel:

For the appellant: Non-counsel representative

For the respondents: Non-counsel representative

 

Solicitors:

For the respondents: In-house solicitor

 LTL 15/6/2009 : (2009) STC (SCD) 450      

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Document No.

 

AC0120902

 

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