TC09681 - [2025] UKFTT 01333 (TC)

At the end of each payment interval (each week or month or as otherwise agreed with the individual), Jarvis made two payments to the individual.

The first payment made from Jarvis to the individual was the basic salary which it had been agreed that individual would receive. Tax and national insurance contributions were deducted from this basic salary. Jarvis issued payslips to the individual and these payslips show the basic salary and the deductions made. By way of example, individual CKC provided HMRC with a payslip dated 23 August 2019 showing her weekly basic salary of £270.83 for this period. Deductions totalled £40.61, and so a net payment of £230.22 was due to CKC. CKC’s bank statement showed a payment of £230.22 was received from Jarvis on 23 August 2019.

In addition, on either the same day or the next working day, Jarvis paid a larger amount (from which was apparently deducted employers National Insurance Contributions but no tax) to the individual. This payment was apparently made pursuant to the Grant Option Agreement. In the case of CKC, her bank statements show Jarvis made a second payment of £417.25 to her on 23 August 2019.

While the second payment to CKC was larger, it was of a similar scale to the basic salary payment shown on CKC’s payslip. In some cases there was far greater disparity. On 30 October 2019, Jarvis paid individual CMN a basic salary (net of tax and NICs) of £218.92. In his response to HMRC enquiries, individual CMN told HMRC that on 30 October 2019, he had also received an additional payment from Jarvis of £21,730,91, and that this larger payment was not taxed.

In the examples shown in the bundle, the larger payment does not appear on the individual’s payslip but the second payment is apparent either from the bank statements in the bundle or is stated in the individual’s response to HMRC’s enquiries. Individual JE confirmed to HMRC in response to HMRC’s enquiries:

Individual JE provided HMRC with a copy of Moir’s email of 9 August 2019 to individual JE, which stated:

Moir told individuals that the second (larger) payment should not be considered to be income. In an email to individual CMN on 4 November 2019, Moir stated:

In each case, the larger payment made to the individual was made net of the deductions made by Jarvis for its fees. Individual JE provided HMRC with illustrations sent to him of the amounts he would receive if he were to provide his services via Jarvis. One of these illustrations, sent on 1 April 2019, was based upon a work placement entitling JE to a gross fee of £1,591 each week. The illustration showed a “weekly gross salary” of £291.67 and a weekly gross “PPTD” (also described as “the annuity portion”) of £1,299.33. A total of £39.28 (being tax, employees National Insurance Contributions and PI insurance) was shown as being deducted from the weekly gross salary. The illustration also showed deductions of £236.66 from the PPTD payment, being a management fee of £218.76 and employers National Insurance Contributions of £17.89.

The illustration specified that JE would take home 83% of the gross pay due under the work placement. In contrast, Moir’s estimate was that if individual JE used a traditional PAYE umbrella solution and had about £300 of expenses each week then he could expect to receive “close to 71% of your gross income”.

In the “annuity based payment solution” offered to individual JE, the management fee charged by Jarvis (of £218.76) amounted to approximately 13.75% of the gross salary that the end-client was prepared to pay for JE’s services. A subsequent illustration, sent to individual JE on 25 July 2019 for a different prospective placement, showed a weekly gross fee of £1,480. The weekly management fee had reduced to £203.50 but remained at 13.75% of the gross weekly fee to which JE was entitled. A third illustration, sent on 5 August 2019, shows a weekly gross fee of £1,295. The management fee which Jarvis would deduct is £178.06, which is approximately 13.75% of the gross weekly fee to which JE was entitled.

Moir provided similar illustrations of the annuity model to individuals CKC and SH, except that these both showed annual figures and there was a less detailed breakdown of the deductions. In an illustration dated 5 September 2019 for individual CKC, a gross annual salary of £40,724 was shown. A total deduction of £6,127.55 was shown for both insurance and Jarvis’s management fee. This is a deduction of approximately 15% of the total gross annual salary. Similarly, in an illustration dated 2 May 2018 for individual SH, a gross annual salary of £91,200 was shown. A total deduction of £13,068 was shown for both insurance and Jarvis’s management fee. This is a deduction of approximately 14.33% of the total gross annual salary.

While there are no similar illustrations for the traditional PAYE model offered by Moir in the bundle, there are three payslips for individual JE. These are all for the same week and so I find, on the balance of probabilities, that these are illustrations prepared for JE to show him how his weekly take-home salary (of £1,591 in all of these estimates) would differ with different levels of expenses. In each of these examples, the “margin” that Moir (as apparent employer) would charge as an umbrella company is £26 each week.

I am satisfied that the “annuity solution” under consideration here is not (to use Moir’s words) a “traditional PAYE model”. I am also satisfied that a smaller amount of tax and NICs was deducted from the total payments Jarvis made to an individual when that individual used the annuity solution, than would have been deducted had that individual used a traditional PAYE model.

Having set out the relevant arrangements, I can now consider the issues in dispute.