Upper Tribunal Tax and Chancery Chamber

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

Fecha: 15-Dic-2023

The parties’ submissions

The parties’ submissions

29.

HMRC’s case is that the FTT did not follow its own self-directions. Mr Stone says that the FTT identified sets of terms for the hypothetical contracts between Mr Alcock and his end clients (FTT [485]). However, it did so at the end of its decision notice and only after having applied the common law test for employment status to the terms of the actual contracts themselves (i.e. the LLCs and the ULCs). The FTT did not, as required by section 49(1)(c) ITEPA and the relevant case law, construct hypothetical contracts and then apply the common law test to the terms of those hypothetical contracts.

30.

As a result, Mr Stone says:

(1)

the FTT did not properly engage in the tasks required of it by the guidance in case law (principally HMRC v Atholl House Productions Ltd [2021] UKUT 37 (“Atholl House UT”, which was not available to the FTT when it made its decision) or the intermediaries legislation to construct the hypothetical contracts. For example, the FTT did not consider:

(a)

what terms the end clients and Mr Alcock would have agreed if they had been required to contract directly (Atholl House UT [56]); or

(b)

what relevant “circumstances” might be taken into account in constructing the hypothetical terms, as required by sections 49(1)(c) and 49(4) ITEPA 2003;

(2)

the FTT did not apply the common law test of employment status to the terms of the hypothetical contracts as found. Instead, it applied the test to the terms of the actual contracts.

31.

Mr Stone says that these were material errors of law. For example, the FTT found (at FTT [485(5)]) that that the hypothetical contract would contain a provision to the effect that work for the end clients was “to be conducted mainly within business hours for an average of 40-45 hours per week”. However, the FTT did not consider whether the inclusion of that provision in the hypothetical contract might affect its conclusions as to whether there was mutuality of obligation between the parties to the hypothetical contracts to constitute an employment relationship.

32.

Mr Paulin, for RALC, submits that there was no material error in the FTT’s approach. He makes three main points in response to HMRC’s arguments.

(1)

First, he says that HMRC’s submissions do not properly reflect the FTT’s approach. The Decision is consistent with the three-stage approach set out by the Court of Appeal at Atholl House CA [7]. The FTT: analyses the actual contracts – the LLCs and ULCs – and other relevant factors (at FTT [96] – [230]); constructs the hypothetical contracts (at FTT [315] – [348]); applies the common law test of employment status to the hypothetical contracts (at FTT [349] et seq); and sets out the terms of the hypothetical contracts that apply as a result of that analysis at FTT [485]).

(2)

Second, the process set out in Atholl House CA [7] is simply a “helpful structure”. It is accepted that the process of synthesising a hypothetical contract may be an iterative process (Atholl House UT [8(2)]). Even if the FTT does depart at some point from strict adherence to the three-stage process in Atholl House CA [7], the FTT completes the exercise of addressing the issues that are required for the purposes of the legislation.

(3)

The challenges to the Decision raised by HMRC are challenges to evaluative judgments made by the FTT. There is limited scope to interfere with an evaluative decision of the FTT on an appeal (Quashie v Stringfellows Restaurant Ltd [2012] EWCA Civ 1735 (“Quashie”) at [9]). It is inappropriate to over-analyse the process of the FTT’s reasoning in such cases. The correct approach is to read the decision “in the round” (Red White & Green Ltd v HMRC [2023] UKUT 83 (TCC) at [36] – [37]).