TC09663 - [2025] UKFTT 01250 (TC)

The next point to consider is that relating to “personally provides services…to another person (‘the client’)”. Mr Young appears to suggest that, for the purposes of s 44(1)(a), the ‘services’ in question are provided not by the dog-handlers, but by the dogs themselves. We are satisfied that this analysis is incorrect. We find that there is force in Mr Stone’s submission that the dog detection services provided by the Appellant depended, entirely, on the dog-handler’s work. Without the dog-handler’s presence, it would be impossible to realise effective search detection services.

The word ‘service’ or ‘services’ is an ordinary English word and takes its meaning from the legislative context. The context here is the Agency legislation, and the language used by Parliament seeks to capture those circumstances in which work is being done by an individual for someone else. The individual is personally providing something of utility to the client. We are in agreement with Mr Stone’s submission that s 44(1)(a) does not require an obligation - whether contractual or otherwise - on the worker’s part to provide services personally.

In the Fulham contract, the sub-clauses that the Appellant had warranted, and undertaken, at Clause 7.1 were as follows:

“7)

OBLIGATIONS

7.1

The Service Provider represents, warrants and undertakes to Fulham as material terms of this Agreement that:

(a)

it is a properly constituted company registered under the laws of England and Wales;

(b)

it has all necessary capacity, power and authority to enter into this Agreement and comply with its obligations hereunder and this Agreement is executed by a duly authorised signatory legally able to bind the Service Provider;

(c)

it has disclosed to Fulham all such material facts, matters and/or things as would reasonably be likely to affect the proper performance of the Services by the Service Provider and/or the willingness of Fulham to enter into this Agreement;

(d)

it is a company specialising in the provision of the Services and it and any Personnel have and will continue to have at all times during the Term, all the necessary qualifications, experience and capability required in order to deliver the Services to the highest industry standards;

(e)

it will comply in all respects with Fulham's written directions from time- to-time in relation to the Stadium, the Training Ground and/or the performance of the Services;

(f)

it will not, without Fulham’s express written consent, use the Brand or any intellectual property owned by Fulham (including but not limited to any brand names, trading names, logos or internet domain names, whether registered or unregistered) or hold itself out as having any association with Fulham or any of its players or seek to exploit the intellectual property owned by any other business owned by or associated with the Chairman, including but not limited to the Jacksonville Jaguars LLC or Flex-N-Gate LLC;

(g)

it will not, without Fulham’s express written consent, permit to be displayed at the Locations (including on any objects or structures at or brought onto the Venue) any branding, logo, signage or intellectual property of any nature which is owned by or associated with the Service Provider;

(h)

it and those persons or Personnel by whom the Services are provided shall possess and/or exercise such technical skill and care as may be required in order to carry out the proper performance of the Services to the highest industry standards and shall comply in all respects with all labour, employment, health, sanitation, safety and/or any other applicable laws, regulations, orders, directions or codes of practice in force from time to time and which are applicable to the Services, such compliance to be at the sole cost of the Service Provider;

(i)

it shall ensure that all Search Dog Operatives comply in full with the provisions of this Agreement as if they were a party to this Agreement and the Service Provider shall be liable to Fulham for the acts and omissions of any Stewarding Personnel in their performance of the Services or in undertaking of any other activity in relation to this Agreement;

(j)

it shall ensure (and shall be responsible for any costs associated with ensuring) that all Search Dog Operatives:

(i)

are legally entitled to work within the UK;

(ii)

wear suitable apparel, footwear and/or clothing in performing the Services;

(iii)

understand and comply with Fulham’s Health and Safety requirements; and

(iv)

have and display at all times when providing the Services, proper identification;

(k)

it shall ensure that any Service Equipment is used and operated safely and only by Search Dog Operatives who are properly trained to use such equipment;

(l)

it shall ensure that the Service Equipment is fully tested to the highest industry standards, of appropriate quality, fit for purpose and CE marked;

(m)

it shall not (and shall procure that the Search Dog Operatives shall not) undertake any act or omission or do, say or permit to be done or said anything which brings into disrepute, defames or is otherwise damaging to the image or reputation of Fulham, any of its employees, officers, directors or contractual partners, the Chairman, or any of the businesses owned by or associated with him, including but not limited to the Jacksonville Jaguars LLC or Flex-N-Gate LLC;

(n)

it has and will continue to hold (and shall procure that all Search Dog Operatives hold) at all times, any such licenses, consents, approvals or other permissions as may be required in order to carry out the Services;

(o)

it shall ensure that the Search Dog Operatives shall comply in all material respects with all applicable statutes, regulations, codes of conduct (whether produced by any relevant authority, Fulham or otherwise) collective agreements, terms and conditions of engagement, orders and awards applicable to their conditions of engagement, in their performance of the Services;

(p)

it shall be solely responsible for the Search Dog Operatives (including any agents or sub-contractors) in their performance of the Services and shall be liable to Fulham in respect of any failure by any of the Stewarding Personnel to perform the Services adequately and/or comply in full with the terms of this Agreement; and

(q)

all Search Dog Operatives shall be employed or engaged (and remain employed or engaged) by the Service Provider and not by Fulham and the Service Provider will be fully responsible for paying all salaries, wages, commissions, bonuses, national insurance contributions, P.A.Y.E., pensions, sick pay and all other amounts payable directly or indirectly to the Search Dog Operatives.”

These sub-clauses placed various obligations on the Appellant to ensure something, or procure something, that only the worker can actually do. The fact of the matter is that in respect of every engagement for which the Appellant was paid, a dog-handler did “personally provide services” to the end-client, along with the dog. This is because it is the handler who possessed the specialist skills, training and expertise required to effectively deploy and direct the search dogs. The dog could not, itself, decide where, how or what to search, or indeed respond to the end-client’s orders without the dog-handler.

We have already determined that the dog-handler was required to have attained NASDU Level 3 qualifications for Passive/Proactive Drug Detection Dogs and/or NASDU Level 4 qualification for Explosive Detection Dogs. In addition, they needed to have a valid NASDU Level 3 or 4 Certificates for each detection dog that is deployed. The certificate is for a “handler and search dog” team. Furthermore, NASDU and the NACSP both provided training and accreditation to the handlers and their dogs. Furthermore, the individual dog handler was required to be licensed by the SIA.

Whilst not binding on us, though highly persuasive, we have considered the decision of the FtT in K5K, which dealt with the change in legislation from 2014. In K5K, the substantive issue for determination was whether s 44 applied to payments made by K5K to agency workers who had a personal company, and are referred to by K5K as Limited Company Contractors (“LCCs”). One of the arguments advanced in K5K was that because people were working through Personal Service Companies (‘PSC’), the legislation did not apply. At [185], the FtT K5K said this:

“185.

It is common ground that two of the three conditions provided under s 44(1) are met.

(1)

Section 44(1)(b) is met by virtue of the contract between the appellant and the End Client, whereby the appellant is the agency for the purposes of s 44 ITEPA. For completeness, this condition is satisfied whether the relevant contract between the appellant and an End Client is the Hirer Terms (as submitted by the appellant) or some other contract, written or oral.

(2)

Section 44(1)(c) is satisfied under or in consequence of the End Client Contract, whereby: (i) the services of the Worker are provided, and/or (ii) the End Client pays or otherwise provides consideration for the services. For completeness, this condition is satisfied whether the relevant contract between the appellant and the End Client is the Hirer Terms or some other contract, written or oral. For the avoidance of doubt, whilst the appellant appears to dispute that it is the Worker who provides the services, we understand that it is not disputed that the End Client pays consideration for the services in consequence of the End Client Contract.”

In this respect, we find that there is considerable force in Mr Stone’s submission that the Appellant is incorrectly focussing on the service that it provides to its end-clients, rather than the statutory question of whether the relevant individual has personally provided services to the client; irrespective of whether a form of equipment was also provided at the same time.

At [191], the FtT commented:

“191.We find the analysis of the contractual relationships upon which the appellant’s argument is founded to be very unclear, for the reason that the term ‘body corporate’ seems to be used interchangeably to refer to either a Hirer or a Personal Company (of an LCC).”

At [192], the FtT says this:

“192.

Whatever the appellant’s position on the alleged contract between any Personal Company and an End Client, ultimately the appellant argues that the Workers did not personally provide services to any of the End Clients. As we understand it, the crux of the appellant’s argument is that (a) ‘services were provided by the company that contracted to provide them’, and (b) ‘None were/are provided by any such company’s servant or agent’. We address each limb of the argument by asking the following questions:

(1)

Was the Intermediary / Personal Company in the contractual chain?

(2)

Did an LCC Worker personally provide services to any of the End Clients?”

At [193], the FtT rejected the point about the PSC being a contractual chain, as follows:

“Was the Intermediary / Personal Company in the contractual chain?

193.

We address the first limb of the appellant’s argument by asking the question whether the Personal Companies (of the relevant workers) were a party in the contractual chain to supply the relevant workers to the End Clients. We find as a matter of fact that during the Relevant Period, the contractual arrangements in place meant that the Personal Companies in question were never a party in the contractual chain.

(1)

The template Worker Contract was the only contract in place for the appellant to contract with an Agency Worker.

(2)

It was the same Worker Contract being used, whether the Worker was an individual or an LCC; no separate or additional terms existed whereby the appellant contracted with the Personal Company of an LCC.

(3)

The appellant contracted with an End Client in accordance with the two versions of Hirer Terms of Business in use during the Relevant Period; one version for the supply of workers as individuals, and one for workers supplied as LCCs.

(4)

The End Clients did not contract with any of the Workers, whether in their capacity as individuals or as LCCs. The End Clients contracted only with the appellant.

(5)

The Company Documents (and in particular, the Confirmation Documents) were not contemporaneous with the Template Worker Contracts during the Relevant Period to alter the fact that no contract existed between K5K and the Personal Companies.”

At [197], the FtT said this:

“Did LCC Worker personally provide services to any of the End Clients?

197.

In support of the second limb of the appellant’s argument that s 44(1)(a) is not satisfied on the facts, Mr Jones submits that:

(1)

It is significant within ITEPA a different word ‘provide’ is used for s 44(1)(a) from that of ‘perform’ under s 49(1)(a), which states:

‘an individual (“a worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),’

(2)

Where the statutory wording uses ‘provide’ instead of ‘perform’, Mr Jones submits it is as clear as a bell that ‘provide’ is concerned with the contractual arrangements, while ‘perform’ is concerned with a matter of fact as to who actually does the work.

(3)

The ultimate question under s 44(1)(a) is therefore: ‘Who is contractually obliged to provide the service?’

(4)

The answer must be construed with reference to the definition of ‘Agency Worker’ within the Hirer Contract, which means ‘any officer, employee or representative of the Intermediary supplied to provide the Intermediary Services’. It is the Intermediary which is obliged to provide the Intermediary Services, and can fulfil its obligation by providing ‘a representative’.

(5)

A relevant worker is not contractually required to be the individual who personally provides services to the End Client; hence the condition under s 44(1)(a) is not met.”

HMRC’s submission in K5K was at [198]:

“198.

In response, Mr Tolley make the following submissions:

(1)

As a matter of statutory construction, s 49 should not be taken in isolation, and it is apt to consider the statutory purpose of a particular section.

(2)

On a proper interpretation, the words ‘personally provides services’ in subsection 44(1)(a) do not refer to the contract to provide services (unlike subsections (b) and (c)). Rather they refer to the reality of the individual person who actually provides the services: here, the nurse or health care assistant, and in other cases, it might be an IT worker or project manager.

(3)

Section 44 is intended to cover situations where an agency supplies individual workers to clients, and so it would be illogical for s 44 to require a contract between the worker and the end client.

(4)

Following the construction of s 44, the party contractually engaged to provide the services is the ‘worker’ for s 44(1)(a) purposes. If the Personal Company is the contractual party, then HMRC accept that the appeal succeeds.

(5)

Whilst it is not uncommon for an intermediary to sub-contract, the appellant’s proposition that a ‘corporate representative’ can be sent is unrealistic, where the work can only be performed by an individual suitably qualified; the proposition is ‘devoid of commercial reality’ in the care sector environment which is so heavily regulated.”

The FtT’s decision is at [199] to [200], as follows:

“199.

As a matter of statutory construction, we agree with Mr Tolley’s submissions on the statutory wording of ‘personally provides services’ under subsection 44(1)(a) for the reasons:

(1)

Section 44(1)(a) does not refer to any obligation (whether contractual or otherwise) on the worker to provide services personally. Rather, it refers simply to the facts: ‘an individual ... personally provides services ...’.

(2)

The interpretation of the current version of s 44(1)(a) as simply referring to a matter of fact of ‘an individual personally provides services’ is supported by the removal of any reference to ‘an obligation’ when compared to the superseded version of s 44(1)(a) in force between 6 April 2003 and 5 April 2014, which reads:

‘(a) an individual (“the worker”) personally provides, or is under an obligation personally to provide, services (which are not excluded services) to another person (“the client”),’ [underlined wording removed]

(3)

Section 44(1)(b) expressly envisages the services being provided under a contact between the end client (or connected person) and ‘a person other than the worker’.

(4)

Section 44(1)(b) makes no sense if there were any direct contract for the provision of the services between the Personal Companies and the End Clients under s 44(1)(a) (as contended by the appellant in reading into the words ‘personally provides services’ as pertaining to a contractual obligation.

(5)

If there were a contractual obligation being referred to under s 44(1)(a) as a matter of law, or a contractual arrangement in place between the worker and the end client as a matter of fact, then on these disputed premises, the appellant has not provided any sensible answers as to:

(a)

What was the point of the appellant’s involvement in the arrangements?

(b)

Why were the End Clients making payment to the appellant in respect of the provision of the services?

200.

We reject the submissions in relation to the assertion that ‘no individual personally provided any services to any of the hirers’ as a matter of statutory construction.”

The FtT in K5K observed that the legislation was amended in 2014 to remove the words “or is under an obligation personally to provide”. That change reinforced the point that the current legislation does not contain any obligation to provide services and focusses instead on whether they are provided.

Consequently, therefore, in respect of Mr Thornborrow’s work on the Tideway site as a dog-handler, we are satisfied that he is personally providing services in the sense that he is present on site; whether those services are as a dog-handler or dog-detection services. We are satisfied that the label does not matter. For example, in respect of whether Mr Thornborrow is providing those services to another person, the answer is ‘yes’ (Tideway). We find that it does not matter that he is not able to provide those services without a vital piece of equipment that he owns (i.e., the dog). There is no test of “if you are using a piece of equipment, is the equipment incidental to the service or not?” The positive question posed by the legislation is whether Mr Thornborrow personally provides services. This is simply a question of fact, e.g., “Is Mr Thornborrow personally providing services?” This is supported by the removal of any reference to the ‘obligation’ when compared to the superseded version of s 44(1)(a) in force between 6 April 2003 and 5 April 2014.

In order to realise an effective search, it is not enough to deploy the dog alone. This is because the dog’s reactions and findings must be interpreted and communicated. This is an essential part of the detection service, which can only be done by the dog-handler. The dog-handler’s personal judgment, and analysis, are critical to determining whether a genuine threat has been detected. The search dogs are treated like any other piece of specialist security equipment operated by trained personnel. As rightly submitted by Mr Stone, in the context of capital allowances, working dogs are treated as plant on the basis that they are an apparatus with which the trade is carried on, with an expected life of two years or more.

We, therefore, hold that ‘Condition 1’ (i.e., s 44(1)(a)) is satisfied in this appeal. We now turn to ‘SDC’.