UT (Tax & Chancery) UT/2019/0000122 - [2025] UKUT 00124 (TCC)

Mr Paulin’s principal submission was that taking into account the errors made by the FTT on Grounds 1 and 2, the RBH hypothetical contract was indistinguishable from the MMH hypothetical contract which the FTT had found was not a contract of employment. It had now been established in the UT Decision that the RBH hypothetical contract contained no provision for notice and no obligation for RBH to use reasonable endeavours to provide Mr Mantides with work. As such, the only material point of difference between the two hypothetical contracts was the existence of a qualified right of substitution in the MMH contract. Mr Paulin said that in both cases the FTT had found that there was the requisite obligation to provide personal service and he described the difference between the two hypothetical contracts as “vanishingly small”. In order to ensure consistency and legal certainty, he argued, we should therefore set aside the decision of the FTT in relation to payments under the RBH contract and remake the decision so as to allow the appellant’s appeal.

We do not consider that is the correct approach. We agree with Ms Choudhury that it is not appropriate for the purposes of Ground 3 to simply compare the position in relation to the RBH hypothetical contract with the FTT’s findings in relation to the MMH hypothetical contract. We are concerned solely with an appeal against the decision of the FTT in relation to RBH. Whilst similar services were supplied by Mr Mantides on similar terms it is necessary to focus on the terms of the RBH hypothetical contract in determining the status of that contract. It serves no purpose to explore the FTT’s decision in relation to the MMH payments when the focus must be on its decision in relation to the RBH payments. That is especially the case when the authorities in this area have moved on since the Decision.

The appellant’s approach in our view involves the same sort of error that the Court of Appeal in Atholl House identified on the part of the Upper Tribunal at [126] – [129]. We do not accept Mr Paulin’s attempt to distinguish Atholl House in that respect. Ultimately, Mr Paulin accepted during the course of oral submissions that it was not appropriate to determine the status of the RBH hypothetical contract by reference to the FTT’s findings in relation to the MMH hypothetical contract.

Mr Paulin’s alternative submission was that the absence of a notice period and the absence of any obligation on RBH to provide work to Mr Mantides were strong factors pointing away from employment. If the FTT had correctly taken those factors into account at the third stage then its decision might have been different and we should therefore set aside the FTT Decision and remake it.

It was common ground (as Mr Paulin confirmed in the hearing) that the errors of law established in Grounds 1 and 2 did not mean that there was no mutuality of obligation at the first stage. Nor was there any issue as to the existence of a sufficient framework of control at the second stage. Mr Paulin also acknowledged that he did not have permission to challenge any of the FTT’s findings of fact or its evaluative findings at the third stage. However, he submitted that taking into account the errors of law and the FTT’s other findings we should remake the Decision and find that the RBH hypothetical contract was not a contract of employment.

In the UT Decision, the Upper Tribunal stated as follows at UT[51] and [52] in relation to the two errors:

In our view, the errors of law identified were material errors in the sense that they might have made a difference to the FTT’s ultimate conclusion as to the nature of the RBH hypothetical contract. We agree with Ms Choudhury that the error in Ground 1 would not in itself have been sufficient to make any difference to the FTT’s decision. However, the error in Ground 2 and the two errors taken together do lead us to conclude that those errors might have made a difference to the FTT’s decision. As such we should exercise our discretion to set aside that part of the Decision and we will remake the decision (in accordance with the approach set out by Henderson LJ in Degorce v HM Revenue & Customs [2017] EWCA Civ 1427 at [95]).

As noted above, the case put by Mr Paulin was that as a result of the FTT’s errors under Grounds 1 and 2, it erred in its analysis of the strength of mutuality of obligation at the third stage.

Mr Paulin relied on the FTT’s error under Ground 1 in finding that the RBH hypothetical contract contained a term that it was terminable on one week’s notice. It is clear from PGMOL at [59] that the right to terminate a contract is irrelevant at the first stage in relation to the existence of mutuality of obligation, but may be a relevant factor for consideration at the third stage.

In the course of its analysis at the third stage, the FTT stated at FTT[118] that a contract terminable on one week’s notice was not an indication of self-employment. We are satisfied that the FTT thereby erred in law. It ought to have taken into account that the RBH hypothetical contract was terminable without notice. This was not in the context of mutuality of obligation, but in its consideration at the third stage of the terms of the hypothetical contract and all the circumstances of the case. In our view it is a factor which points against employment. However, it is a weak factor in the context of a relatively short, temporary engagement.

Mr Paulin also relied on the FTT’s error under Ground 2 in finding that RBH had an obligation to use reasonable endeavours to provide Mr Mantides with 10 half day sessions in a week. Mr Paulin accepted that on the authority of PGMOL the absence of such an obligation did not mean that there was no mutuality of obligation at the first stage. However, he submitted that the extent of the mutuality of obligation was thereby reduced. Relying on PGMOL, he submitted that the FTT ought to have taken into account at the third stage the reduced extent of the mutual obligations.

At FTT[114], the FTT noted that Mr Mantides bore the risk of his contract being terminated early and that he could be provided with less than 37 ½ hours work per week. It treated these as factors which pointed weakly to self-employment.

We are satisfied that the FTT erred in law in failing to take into account the true extent of the mutual obligations under the RBH hypothetical contract. It failed to take into account that whilst there was mutuality of obligation in the sense of a wage-work bargain, there was no obligation whatsoever on RBH to provide Mr Mantides with work.However, we do not consider that the absence of an obligation to provide work significantly increased the strength of the factors pointing towards self-employment. The fact that there was no obligation on RBH to provide work, or to use reasonable endeavours to provide work, reflects the fact that the contract was terminable without notice. Whilst the combination of those two factors points against employment, they are not particularly strong pointers in the context of a relatively short, temporary engagement.

The FTT found at FTT[104] that the RBH hypothetical contract was a contract for Mr Mantides’ personal service which was a pointer towards employment. It found at FTT[105] – [109] that Mr Mantides was subject to a sufficient measure of control but not such that pointed strongly towards employment. The FTT also considered and evaluated other factors at FTT[112] – [119].

Save in relation to Grounds 1 and 2, there has been no challenge to the FTT’s findings or its evaluative judgment in relation to those findings. At one stage during his submissions, Mr Paulin did seek to criticise the FTT’s evaluative judgment in relation to some of its other findings. However, he acknowledged that he was not seeking to re-open the FTT’s evaluative exercise at the third stage other than in relation to Grounds 1 and 2. In remaking the decision, we shall therefore adopt the FTT’s findings and its evaluative judgments at the third stage, save in relation to the errors of law identified in Grounds 1 and 2. In doing so, it should not be assumed that we would necessarily have attached the same significance and weight as the FTT attached to these factors if we had been considering the third stage entirely afresh.

The RBH hypothetical contract was a contract for personal service which the FTT found was a pointer towards employment: FTT[104]. Unlike the MMH Contract, which would have contained a limited right of substitution, the RBH Contract would have been for the personal services of Mr Mantides, and there would have been no right of substitution: FTT [103(3)].

There was a sufficient framework of control for that contract to be an employment contract and there was mutuality of obligation in the sense of a wage-work bargain.

We have set out above our view as to the significance of the right to terminate the RBH hypothetical contract without notice and of the absence of any obligation on RBH to provide work to Mr Mantides. In addition, we adopt the following evaluative judgments of the FTT:

We must now stand back and consider all the terms of the RBH hypothetical contract and all the circumstances. Taking into account the errors identified above, together with the FTT’s other findings, on balance we are satisfied that the RBH hypothetical contract was a contract of employment. We therefore remake that part of the FTT Decision accordingly. Whilst we have set aside the decision of the FTT in relation to payments to the appellant from RBH, we are satisfied that the FTT ultimately came to the right conclusion.