GP continued providing locum services through agency and not his company

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A GP who supplied locum services on a self-employed basis to an agency was held to have continued doing so, despite having purportedly incorporated his business, and he therefore remained subject to income tax and Class 4 NICs. 

The appellant, a GP, commenced work as a self-employed locum with an agency on 1 April 2006. The arrangements, which were contractual, continued for two years. During that period, payments were made by the agency to the appellant’s personal bank account. Invoices were not originally required. All costs and expenses were made out of the appellant’s personal account.

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The appellant’s accountants advised him to incorporate his business, and a company (KSMM) was incorporated on 31 March 2008. The appellant and his wife were the shareholders and directors. From 1 April 2008, the accountant prepared accounts and submitted company and personal tax returns on the basis that the company was the entity providing the services to the agency.

No further contracts with the agency were entered into by the appellant or KSMM, so the arrangements were governed throughout by the original contract. KSMM had no bank account until 2010. No funds flowed through the account except for an initial sum of £500 paid in by the appellant, which was used to pay bank charges. KSMM did not exist for a 15-month period, having been struck off in July 2011 and reinstated in November 2012. The agency was unaware of the existence of KSMM. All payments due from the agency were paid into the appellant’s personal bank account.

HM Revenue and Customs (HMRC) contended that KSMM had never traded and that the appellant had continued to work for the agency as a self-employed individual for the tax years 2008/09 to 2013/14 inclusive. HMRC were seeking additional tax, NICs, and penalties of £576,047. The appellant appealed. 

The First-tier Tribunal (FTT) noted that the relationship between the agency and the appellant was contractual. The agency was unaware of the existence of the company and had no contract with it.

The FTT considered that the arrangements for the payment of remuneration, the payment of business expenses, the receipt of the money into the personal account and the issue of invoices to the agency in the appellant’s name (especially as invoices were not required until after the company was formed) were not just consistent with, but were evidence of, the fact that the appellant was carrying on the business as a self-employed individual. 

The FTT concluded that the profits earned by the appellant should be subject to income tax and Class 4 NICs, and not to corporation tax. The appellant’s appeal was dismissed.

Baloch v Revenue and Customs [2017] UKFTT 665 (TC)