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UT (Tax & Chancery) UT-2024-000044 - [2025] UKUT 00094 (TCC)
Fecha: 23-Ene-2025
The FTT’s application of the third stage of the employment test was wrong in law
The FTT’s application of the third stage of the employment test was wrong in law
The latest guidance on the proper approach to considering RMC3 is provided in HMRC v S & L Barnes Ltd [2024] UKUT 262, [2024] STC 1813(“Barnes UT”). That decision was promulgated after the FTT’s Decision in this case.
The Upper Tribunal in Barnes UT at [108(3)] suggested that tribunals should divide material provisions of the contract and other circumstances into: i) those which are consistent with an employment relationship; ii) those which are inconsistent; iii) and those which are neutral. Further, as confirmed, at [54]-[57], the question of whether a particular factor is potentially relevant or irrelevant to the employment status of a hypothetical contract is a matter of law. The weight to give to the factors in the multifactorial evaluation is matter for the Tribunal with which the Upper Tribunal will be reluctant to interfere.
We do not consider Barnes UT to be wrong in its guidance on RMC3 and follow it. It is consistent with the higher authority of Atholl House CoA at [75]:
…Whether the third condition is one of consistency or inconsistency with a conclusion of employment strikes me as a largely arid debate. The court or tribunal will in any event have to analyse the terms of the contract and reach a conclusion whether they are consistent or inconsistent with a relationship of employment. Given that mutuality of obligation and control are necessary elements of employment, there will inevitably have to be factors pointing in the opposite direction, but it is, in my view, no more than that…
Mr Firth submits that the FTT erred in relation to each one of the ten factors it considered at [68] of the Decision in its overall assessment of whether the hypothetical contract between Sky and Mr Thompson would be a contract of employment.
We address in turn each of the factors considered by the FTT as part of its reasoning at [68], accepting Mr Stone’s submissions.
- Heading
- INTRODUCTION
- THE LAW
- THE FTT DECISION AND THE EVIDENCE
- The background leading up to Mr Thompson’s work for Sky before 2013
- The contracts with the Appellant company and their operation from 2013
- THE GROUNDS OF APPEAL
- A(1) Erroneous approach to and interpretation of “on an ad hoc as and when required basis”
- The FTT Decision
- The Appellant’s submissions
- Discussion and Analysis
- A(2) Erroneous approach to interpreting “all directions and requests…will be complied with”
- The FTT Decision
- The Appellant’s submissions
- Discussion and Analysis
- A(3) Erroneous construction of the provision relating to travel and destination
- The FTT’s Decision
- The Appellant’s submissions
- Discussion and Analysis
- B(1) Wrong approach to establishing hypothetical contract
- The FTT’s Decision
- The Appellant’s submissions
- Discussion and analysis
- (B2) Failure to take into account relevant evidence
- Discussion and Analysis
- (B3) Approach to the “informal arrangements” evidence
- Discussion and analysis
- (B4) Reasonableness not a permissible shortcut
- Discussion and analysis
- The FTT’s decision as to whether the necessary framework of control existed was wrong in law The FTT Decision
- The Appellant’s submissions
- Discussion and analysis
- The FTT’s application of the third stage of the employment test was wrong in law
- 68(1) “The control set out above was considerable. In particular Sky’s…right to require Mr Thompson’s performance of the services at location of their choosing is consistent with an employment relatio
- Discussion and analysis
- 68(2) “Mr Thompson’s role as a pundit and a guest giving his own opinion does not tend against the hypothetical contract being an employment contract.”
- Discussion and Analysis
- 68(3) “The manner in which Mr Thompson prepared for and provided these services is not inconsistent with an employment relationship. The same is true of the fact that Mr Thompson would leave as soon a
- Discussion and Analysis
- 68(4) “The fact that Mr Thompson’s opinions and analysis remained his does not affect the employment relationship. Crucially, the hypothetical contract restricted Mr Thompson’s ability to exploit thos
- Discussion and Analysis
- 68(5) “The hypothetical contract provided for termination by Sky but not by Mr Thompson.”
- Discussion and analysis
- 68(6) “Whilst Mr Thompson had his own status and character as a result of his expertise and professional background, he had become associated with Soccer Saturday. This was recognised in the wording o
- Discussion and Analysis
- 68(7) “The fact that the payment was paid as a block fee regardless of air time is neutral. Whether this is a salary or a fee depends upon whether the arrangement was an employment contract or not rat
- Discussion and Analysis
- 68(8) “It is right that Mr Thompson’s work for Sky took up a relatively small amount of his time and that this was one method of capitalising on Mr Thompson’s own status and character. However, this m
- Discussion and Analysis
- 68(9) “The fact that Mr Thompson had the potential to increase his income through the efficient use of his time is neutral. This is saying no more than the fact that Mr Thompson could earn money from
- Discussion and Analysis
- Overall assessment lacking in logic and outside the reasonable range
- Discussion and analysis
- Conclusions