DATAGATE SERVICES LTD v REVENUE & CUSTOMS COMMISSIONERS (SpC656) (2007)

Sp Comm (Adrian Shipwright) 20/12/2007

TAX - EMPLOYMENT

CONSULTANCY AGREEMENTS : EMPLOYMENT STATUS : PAYE : ARRANGEMENT FOR PROVISION OF CONSULTANCY SERVICES : EMPLOYMENT STATUS OF CONSULTANT

In the circumstances, the Revenue had been wrong to consider that arrangements made between two companies through an intermediary for the provision of professional consultancy services had the effect of making the consultant involved an employee of the company engaging his services.

The appellant (D) appealed against determinations made by the respondent Revenue under the Income Tax (Pay As You Earn) Regulations 2003 reg.80, and against a decision made under the Social Security Contributions (Transfer of Functions, etc.) Act 1999 in respect of its liability to pay primary and secondary Class One National Insurance contributions.

D was a company under the control of its sole director and shareholder (B).

Its principal activity was computer consultancy.

D had entered into a contract with another company (T) for the provision of consultancy services and, in turn, T had an arrangement with a third company (M) for the supply of those services.

B worked with M's team: M wished to learn from him and he was provided with discrete sections of work.

There was no provision for the minimum number of hours to be worked, he could arrive and leave when he liked and he could take time off when he wanted.

The issue was whether, had the arrangements taken the form of a contract between B and M, B would have been regarded as an employee of M.

D submitted that B was not an employee but was, rather, like any other self employed consultant.

The Revenue argued that B was effectively an employee because, amongst other things, M had a right of control and B was treated in the same way as an employee, worked in the same way as an employee and had the obligations of an employee.



HELD: Looking at the picture as a whole, the effect of the arrangements was that B's relationship with M was that of a professional consultant providing independent services.

He was in business on his own account and was not a person working as an employee in someone else's business on the hypothetical requirements that the legislation required, Ansell Computer Services Ltd v Richardson (Inspector of Taxes) (2004) STC (SCD) 472 applied.

There was no ultimate right of control on the part of M, there was nothing in the documents requiring personal service, the basis of payment was a fee basis and there was no requirement that B work exclusively for M.

Whilst B was engaged in assisting M's business, he was not integrated as an employee.

Moreover, the parties' intention was that there should be no employment.



Appeal allowed

Counsel:
For the appellant: John Antell
For the respondents: Non-counsel representative

Solicitors:
For the appellant: LawSpeed Ltd
For the respondents: Revenue and Customs

LTL 18/1/2008 (Unreported elsewhere)

Judgment: Official - 8 pages

Document No. AC0116049

Source: Lawtel http://www.lawtel.co.uk , copyright acknowledged.