FUTURE ON-LINE LTD v S K FOULDS (HMIT) (2004)

[2004] EWHC 2597 (Ch)

Ch D (Sir Donald Rattee) 22/10/2004

TAX - SOCIAL SECURITY

COMPANIES : INCOME TAX : INTERMEDIARIES : NATIONAL INSURANCE : SERVICES : NOTIONAL CONTRACT OF SERVICE : CONSTRUCTION OF "CLIENT" UNDER S.1(1) OF SCHEDULE 12 OF THE FINANCE ACT 2000 AND SOCIAL SECURITY CONTRIBUTIONS (INTERMEDIARIES) REGULATIONS 2000 : IR35 LEGISLATION : SERVICE COMPANIES : SCHEDULE E : Sch.12 para.1(1) FINANCE ACT 2000 : reg.6 SOCIAL SECURITY CONTRIBUTIONS (INTERMEDIARIES) REGULATIONS 2000

In the circumstances there had been a direct contract between an individual and an end company and therefore a contract of service existed between them to the extent that, pursuant to the IR35 legislation, that individual's company was required to account for national insurance contributions and income tax during the relevant period.

The appellant company (F) appealed against a determination of the special commissioner.

X had provided specialist IT services through F, his service company, and an agency (E), to an end company (Y).

The special commissioner concluded that if there had been a direct contract between X and Y during the period of engagement it would have been a contract of service and therefore, pursuant to the IR35 legislation, F would have been required to account for national insurance contributions and income tax for the relevant period.

F argued that the special commissioner had erred in his construction of "client" under the Finance Act 2000 Sch.12 para.1(1) and the Social Security Contributions (Intermediaries) Regulations 2000 reg.6 and that by way of the proper construction of para 1 of schedule 12, E was the relevant client.

HMIT contended that the special commissioner had been right to identify the client as Y, had applied the correct test in determining whether the notional contract was one of service, and had been correct to find that it had been.



HELD: It was clear that Y required the services of an IT specialist and it could not be said that X had performed those services for the purpose of E's business.

Y was the only party with whom it could be said that X performed services for business purposes.

The special commissioner had been entitled to find that X had been part and parcel of Y's organisation and that the relationship between Y and X was such that the notional contract between them had been one of service.

Appeal dismissed.

Counsel:
For the respondent: Akash Nawbatt
For the appellant: J Antell

LTL 22/10/2004 : (2005) STC 198

Document No. AC9100131

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