UT/2023/000049 - [2024] UKUT 00233 (TCC)

Reliance on Mr Hugo

Mr Firth argued that “the FTT wholly failed to deal with the Appellant’s submission that Mr Hugo was an independent contractor and it was reasonable for Mainpay to rely on him to obtain the appropriate advice”. The FTT described Mr Hugo as “an accountant with significant experience in the operation of umbrella companies…well aware of the complexities of ensuring that expenses could be reimbursed on a tax free basis”: FTT[208]. It followed, he said, that it was reasonable for Mainpay to rely on Mr Hugo to ask the right questions of Mishcon and obtain the right form of contract.

We do not agree. The FTT clearly understood that Mr Hugo was not an employee of Mainpay but an accountant who acted as a consultant. Like most advisers (including Mishcon) he was independent of Mainpay. It described him, at FTT[20], as “a consultant who advised Mainpay in respect of accounting and finance, including the operation of PAYE”. The mere fact that Mr Hugo was a consultant does not, however, establish that Mainpay took reasonable care in relying on his advice, any more than it did from the mere fact that Mishcon was a respected law firm. We agree with HMRC that it is not sufficient for Mainpay simply to say that it was relying on an adviser when it did not establish that Mr Hugo had himself given advice of his own as to the employment status of the 2010 Contract, including the provision in the 2010 Contract stating that it was not an employment contract. The FTT found that notwithstanding the absence of such advice Mainpay had failed to ask Mr Hugo, Mishcon or anyone else for advice which was crucial to the effectiveness of the proposed arrangements. The FTT was entitled to find that that was a failure to take reasonable care to avoid bringing about the loss of tax.