- Tuesday, 05 August 2014 20:00
- Written by Andy Vessey
HMRC wasted everyone's time
A recent First Tier Tax Tribunal hearing did no more than highlight HMRC's current attitude regarding employment status. It is an attitude that we had believed and hoped had been confined to the murky past but alas has reared its head again during recent months.
This, despite being criticised by the Special Commissioners back in 2006 in the MAL Scaffolding case, in which HMRC was rapped for seeming to “appear to have approached their investigations on the basis that there must be an employment relationship between MAL Scaffolding and the workers there if one looks hard enough. Officers then went looking on that basis and persuaded themselves that they had found that for which they went looking.”
Gabriel Oziegbe was a trained and licensed security guard who, in 2007, began providing his services, on a self-employed basis, to construction companies operating building sites. Around the same time, he started engaging other security guards on occasions when a client had work that he could not himself carry out. Each time a signed contract for services (self-employment) was put in place between himself and the other security guards.
One of the clauses of the contract stated, “I will not control or have any right to control how you undertake the services to be provided but I am entitled to lay down standards of quality and a time period within which the work must be completed at the commencement of any particular service. You will be obliged to act upon any assignment instruction provided by me.”
HMRC's first plan of attack was to try to establish if the workers were really employees of Mr Oziegbe but having been foiled on that score they changed tack by arguing that Oziegbe was acting as an agency. If the Revenue had been able to make the Agency Legislation stick then poor Mr Oziegbe would have been looking at a combined PAYE and NIC bill of up to £50,000. He wasn't even making a profit out of the work, as he would often pay the guards the same rate as what he was receiving from his clients!
Whether or not the security guards were 'agency workers' principally came down to the issue of whether they were subject to the control and supervision or the right of control and supervision of either Mr Oziegbe or the construction company clients.
The workers would go to the relevant sites and would be shown by the site manager the relevant access points to the site, any areas of particular danger, and the type of security provision that the client required. Thereafter, the client company would have no involvement with how the specialist security guards performed their function. The construction companies would get on with the job of building and leave the function of site security to the separately engaged specialists.
The judges took little time in concluding that there could be no right of control over the workers and therefore the Agency Legislation did not apply. They pointed out that the most obvious situation in which control will not be satisfied is where the particular service being rendered is one that is foreign to the basic activity of the client, such that it will be obvious that the client will have no control or right of control over the way in which the services are provided.
Despite the fact that HMRC:
- did not challenge Mr Oziegbe's evidence that nobody had control over how the guards performed their tasks;
- did not bother to obtain evidence whatsoever from either the workers themselves or the construction company clients; and
- received a letter from one of the workers stating, “I had the freedom to decide what work to do, how and when to do the work and where to provide the services.”
they still proceeded to allow this appeal to progress to the tribunal! A staggering waste of public money.
This judgment will be of limited use to contractors and only where a freelancer provides services that are totally different to their clients' principal business.Comments