The importance of “control” in determining the status of self-employed personel
A first Tier Tribunal recently considered the case of Gabriel Oziegbe, who engaged security personel for construction sites. HMRC decided that the personal engaged were AGENCY WORKERS and raised assessments for PAYE & NIC, against which Mr Oziegbe appealed and was successful.
There were two aspects of the appeal that stood out for me:
a) Part of the wording of Mr Oziegbe’s standard contract for services, not only reminded the contractors that they were responisble for thie own tax, he highlighted the fact that although he had some input in the quality and timing of their work he did not control their work (the full wording of this appears in the case report below)
b) His explaination , in tribunal that they had some freedom to operate for as few or as many clients as they wished and thus could affect the amount they earned.
Here is the fuller report of the case as reported by the ICPA:
| Mr. Oziegbe had trained and secured the required licence to act as a security guard and started to work for clients, generally construction companies in 2007. He engaged other similarly qualified security guards when he had work he could not perform personally, entering into Contract for Services agreements with them. The contracts included a number of key aspects normally found in a self-employment relationship including the following in relation to control:“I will not control or have any right to control how you undertake the services to be provided but I am entitled to lay down standards of quality and a time period within which the works must be completed at the commencement of any particular service. You will be obliged to act upon any assignment instruction provided by me.”During the hearing Mr. Oziegbe expanded on the terms of engagement stating that the workers would periodically leave to work entirely on their own account or with some other operator. His letter to HMRC sent in December 2011 was highlighted. In it he confirmed that the security guards he engaged were able to work for as many clients as possible and that he has no direct control while they are were engaged on a job and that they took the risks. The amount of profit they made was in their control. He also confirmed that the security guards had been advised to pay their own tax, and evidence was provided that this had been done for at least four of the people engaged.There was no cross–examination in relation to the contract or letter and the FTT accepted that the statements were broadly realistic. |
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HMRC’s positionAt one point HMRC had considered whether the workers were employees of Mr. Oziegbe but that line of enquiry was dropped on the basis of non-exclusivity of engagement, the workers having their own respective business structures and the intention of the parties. Instead, HMRC turned their attention to the agency rules and s44 ITEPA.The agency rules applied if:• An individual (“the worker”) personally provides, or is under an obligation personally to provide, services (which are not excluded services) to another person (“the client”),• The services are supplied by or through a third person (“the agency”) under the terms of agency contract,• The worker is subject to (or to the right of) supervision, direction or control as to the manner in which services are provided, and
• Remuneration receivable under or in consequence of the agency contract does not constitute employment income of the worker apart from this chapter.
No evidence was put forward by HMRC why they thought the agency rules applied and the FTT found it odd that assessments had been raised when the interview notes between Mr. Oziegbe and HMRC had not established the facts relating to control, had not sought information from either the workers themselves and nor had they identified the construction company clients. |
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FTT commentary and decisionThe tribunal confirmed that the agency rules were designed to deal with the position where workers were neither employed by the agency nor the end clients, but where they nevertheless fitted into the infrastructure of the client where the worker is subject to supervision, direction or control by someone in the supply chain.The tribunal accepted Mr. Oziegbe’s evidence that since he was never on the site with them he had no control over the workers. It would be more pertinent to consider whether control was exercised by the end client especially where the services provided were in keeping with the basic activity of the client. They gave an example of secretaries being engaged to work alongside other employed secretaries who were expected to fit in with the normal work practices.In this case, there was no natural connection between security services provided and the construction services. The client company would simply direct the security workers to the relevant access points on site but have no further involvement on how they carried out their work, leaving them to get on with the construction operation.In view of the unchallenged evidence, the tribunal found that the control requirement of the agency worker provisions was not satisfied and that neither Mr. Oziegbe nor the end clients had control or the right of control over how the work was actually performed. They therefore allowed the appeal.Interestingly, HMRC’s representative conceded that had Mr. Oziegbe’s evidence emerged earlier and been clear to HMRC, it is unlikely that the assessments would have been raised. Moreover, they seemed to accept that it was appropriate for the tribunal to allow the appeal.
Why this matters
With effect from 6 April 2014, the agency legislation has been tightened. Although this particular case related to the previous rules the essential part of the test to remain outside the new rules, is that the worker must demonstrate that they are not under the supervision, direction or control, or right of control, of either the agency or end client. This case will be of interest to those workers engaged in a similar way, in particular, the useful comments made in relation to control where workers are engaged to carry out services that are outside the basic activity of the end client.More worryingly is the fact that HMRC did not explore and examine the facts before taking the case to tribunal or appear to offer any evidence in the case and this raises the concern as to how efficiently HMRC will deal with future reviews and enquiries as the new agency rules take effect. |
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It strikes me that this illustrates the reality of many agents. They do in fact operate remotely from most of thier client’s operation and therefore cannot have a great deal of control over what any operatives do in a remote location.
Perhaps the wording of Mr Oziegbe’s contract and how he explains the position to his contractors is a lesson for anybody who feels that they are at risk from the new Agency Worker Regulations.
Stephen@stephenmilne.co.uk
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Business Accountant 
Just another example of how a simple question can be made complex – are you your own boss?
If I was HMRC I would have asked Mr. Oziegbe about his relationship with the SIA. Surely he is responsible for the on-site risk assessments and if there was a claim by the client for failure to perform (e.g. theft from a site), whose insurance would be claimed?
If he or ‘his’ guards are not registered with SIA then do the clients understand the risks of using un-registered contractors?
Reblogged this on jamesjdcc and commented:
Just another example of how a simple question can be made complex – are you your own boss?
If I was HMRC I would have asked Mr. Oziegbe about his relationship with the SIA. Surely he is responsible for the on-site risk assessments and if there was a claim by the client for failure to perform (e.g. theft from a site), whose insurance would be claimed?
If he or ‘his’ guards are not registered with SIA then do the clients understand the risks of using un-registered contractors?