UT/2020/000377 - [2024] UKUT 00099 (TCC)

In our view, this reasoning displays several errors in the concept of mutuality of obligation that is being applied.

As a starting point, the FTT’s reasoning suggests that it regards some of the factors on which it relies as inconsistent with the concept of mutuality of obligation. This conclusion is not supported by the case law authorities.

In our view, the FTT erred in law to the extent that it regarded these criteria as inconsistent with mutuality of obligation. The FTT appears to recognize this point in some parts of the Decision (see for example FTT [336]). However, its regular repetition of the requirement for an express obligation to provide and to accept further work suggests to us that, in the application of the test, this self-direction has not been followed through.

Furthermore, in its conclusions in relation to its overall assessment of the application of the test of mutuality of obligation to the arrangements as a whole, the FTT refers to the offer and performance of work, which is paid for by the end client as “mutuality of obligation in the broad sense” (at FTT [353]) and concludes that “sufficient mutuality of obligation” does not exist between Mr Alcock and the end client to establish an employment relationship (at FTT [355]). In our view, this conclusion betrays an error of law.

As the Court of Appeal found in PGMOL (PGMOL [119]), the test of mutuality of obligation does not on its own determine whether an employment relationship exists. If mutual work-related obligations exist within the individual engagement, the test is met. That will put the arrangements into “the employment field” (to adopt the terminology of Elias J in James v Greenwich LBC [2007] ICR 577 at [17] (Footnote: ⁴)). A contract of service and a contract for services may equally meet that test. It is then necessary to move to the other limbs of the RMC test to determine whether a contract of employment exists (see the description of the process by Elias LJ in Quashie [10] – [14]). The other factors to which the FTT refers in its assessment may well be factors that have to be weighed in the balance in determining whether the resulting obligations give rise to an employment contract or a contract for services as part of the consideration of the other elements of the RMC test, but they are not determinative of whether mutuality of obligation exists.

As we have discussed, the FTT’s conclusion at this stage of its analysis is important. That conclusion, in effect, decided the case. However, for the reasons that we have given, in our view, that conclusion was founded on errors of law.

Having reached that conclusion, we do not need to reach a view on the other aspects of Ground 2, which concerned the interpretation of the relevant contractual arrangements. We do not do so.

We have also heard argument on the remaining grounds of appeal. However, our conclusions on Ground 1 and Ground 2 are sufficient to decide this appeal in favour of HMRC. We do not need to reach a decision on the remaining grounds of appeal and we do not do so.

We have reached the conclusion that there are material errors of law in the Decision.

We must therefore decide whether or not to set the Decision aside. For the reasons that we have given, we are satisfied that the errors of law are material, and we should therefore set aside the Decision.

Having done so, we must determine whether or not to remake the Decision or to remit this appeal to the FTT. We have decided that we must remit this appeal to the FTT. We do so with some reluctance. We acknowledge the difficulties that this will cause for the parties and, in particular, for Mr Alcock. However, we do not feel that we are sufficiently equipped with appropriate findings of fact to remake the Decision. The tribunal has powers to call witnesses and request further evidence, and to make further findings of fact. However, in the present case, that would require a significant exercise not least because our conclusions effectively reopen the second issue before the FTT (summarized in paragraph 16 above) on which no conclusions were reached.

We therefore set aside the Decision and remit this appeal to the FTT. We direct that this appeal should be heard by a new panel.

We are reluctant to place unnecessary constraints on the FTT in its rehearing of the appeal. However, we make the following comments that the FTT should bear in mind when doing so.