A upper tier tribunal ruling has clarified the employment status of agency workers and confirmed the importance of substitution as a sign that personal services are not being supplied. Nick Huber reports.
In HMRC v Talentcore, (2011 UKUT 423 TCC - PDF version), the upper tribunal ruled that temporary workers doing promotional work at airport duty-free shops were not employees of the agency who supplied them. The decision should be “compulsory reading” for agencies who provide staff to third parties, according to a fellow of the Chartered Institute of Taxation (CIOT).
The judges confirmed an earlier first tier tribunal ruling in favour of the agency’s appeal over employment status agency rules that HMRC had claimed rendered it liable for PAYE.
Talentcore, which trades under the name “Team Spirits”, supplies staff to work at cosmetics concessions at airport duty-free shops. HMRC contended that as suppliers of personal services, the workers were employees and their payments should be subject to PAYE.
The upper tribunal ruled that the “consultants” supplied by Talentcore were not employed under agency rules, so Talentcore was not required to operate PAYE. In his July decision, Mr Justice Roth, praised the “admirable clarity” of the first-tier tribunal’s ruling on the case.
The first-tier tribunal decided the consultants were not employees because there was no “personal service”. The tribunal cited case law to support the view that a “full right” of substitution between workers meant that they were not employees under agency contract rules. If the person contracted to do the work did not need to turn up as long as a replacement is provided, there was no contract of service.
Talentcore selected consultants from a database of temporary staff to work shifts and this was accepted as evidence that a personal service was not being provided.
“The fact that original consultant had complete freedom to arrange for a substitute if he wished, even if he did not actually do so, constitutes in my view an unfettered right of substitution, as found by the FTT,” concluded the judge in his upper tier decision.
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