First-tier Tribunal (Tax)

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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00032.html
Cite as: [2009] STI 1887, [2009] SFTD 84, [2009] UKFT 00032 (TC), [2009] UKFTT 53 (TC)

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Wright v Revenue & Customs [2009] UKFTT 53 (TC) (20 April 2009)
INCOME TAX/CORPORATION TAX
Employment income

TC00032

Appeal number SC 3022/2008

Income tax and National Insurance Contributions - whether workers were employed by the Appellant - Initial appeal allowed by the General Commissioners and held by the High Court to have been based on a wrong application of the law - case remitted to the General Commissioners for them to ascertain further facts relevant to "control" - Case subsequently transferred to the Special Commissioners - Appeal dismissed

FIRST-TIER TRIBUNAL

TAX

PHILIP JOHN WRIGHT Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS (Income Tax & NICs) Respondents

TRIBUNAL: HOWARD M NOWLAN

Sitting in public in London on 26 March 2009

The Appellant did not appear and was not represented

Akash Nawbatt, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

Introduction

This was a case on the familiar topic of whether workers engaged by the Appellant were rightly classified as employees for income tax and National Insurance ("NIC") purposes, as the Respondents contended. I was told that there was little difference between the income tax in fact deducted from wages under the Constructors' Industry Scheme, and the PAYE tax that would be owed if the workers were held to have been employees, so that in substance this appeal related to the primary and secondary Class 1 NICs that the Appellant would be liable for were the Appeal to be dismissed, and the workers held to be have been employees at the times in issue.

The case involved similar facts in many respects to those in the Appeal brought by Castle Construction (Chesterfield) Limited that I decided in October 2008, largely allowing the Appeal, and thus reaching the conclusion in that case that the vast majority of the workers were not employees. The respects in which the facts were similar were that the workers in both cases were engaged by a trader that contracted on a sub-contract basis to undertake particular aspects of building work for main contractors (mainly bricklaying work in the Castle case and groundwork in the present case); the workers were engaged on a flexible basis under which they could be terminated, and could cease work, broadly without notice; they were paid only for hours or periods of days actually worked; they received no pay in the event of illness, or when on holiday or when absent for any other reason, and all the workers provided CIS cards such that they were paid net of the 18% or 20% required do be deducted under the Constructors' Industry scheme in respect of the workers' potential liability to income tax.

The case came before me in a circuitous, and indeed somewhat unfortunate, manner. The case had originally been heard before the General Commissioners where the Appellant's appeal had been allowed. The Respondents then appealed to the High Court on the ground that the General Commissioners had misdirected themselves as to the legal test to be applied. Mr. Justice Lewison allowed HMRC's appeal and held that the reasons that the General Commissioners had given for their decision were wrong. He thus remitted the case to the General Commissioners with a direction that they should find the relevant facts in relation to whether the workers worked under the control of the Appellant, and that they should then reach their decision in response to those findings of fact. He then indicated that he considered that more recent authorities, largely involving agency workers, had been based on the notion that if the control was not exercised by the contracting counter-party that HMRC alleged to be the employer, but by a distinct "main contractor", the conclusion, on the facts, could well be that the workers were not employees.

For reasons of which I was ignorant, the General Commissioners remitted the case to the Special Commissioners. The Appellant resented this and claimed that it involved a failure to follow the directions given by Mr. Justice Lewison. On the morning of the hearing before me on 26 March 2009, at a time when I had no prior knowledge of the case, and had seen neither the Case Stated prepared by the General Commissioners nor the decision of Mr. Justice Lewison, I was informed that the Appellant was refusing to attend the hearing. This was largely on the ground, it seemed, that he objected to the case being transferred to the Special Commissioners. He also resented the fact that the hearing was in London, rather than in Essex where the General Commissioners' hearing had been heard, and finally he pointed out that, although he was no longer using professional representatives, a friend who was going to assist him in presenting his case was unable to attend on the day because he was away on holiday.

HMRC contended before me, as they had set out fully in a letter written as soon as they had gathered that the Appellant was refusing to attend the hearing, that I should proceed to hear the appeal notwithstanding the absence of the Appellant. I decided that it was proper to do so, and will explain below why I reached that decision.

My decision on the substantive matter is that the workers in question were employees. I will explain that decision below in three different ways. First I will deal specifically with the facts relevant to control that Mr. Justice Lewison instructed me to find, and explain the decision by reference to those facts. I will secondly explain why I consider that, on the facts, this case was not on "all fours" with those agency cases where the power to exercise control by a third party to whom an agency worker has been assigned, is to be disregarded in considering whether a worker is an employee of the party to whom he is contracted. Thirdly I will look somewhat more generally at the facts of this case since it is clearly well-established law that in these "status" cases, no one factor is decisive. More recent authorities have indeed slightly diminished the significance of the "control" test, and placed more emphasis on the question of whether the worker is in any sense "engaged in business on his own account", and others have stressed the importance of paying regard to numerous factors and "standing back" and looking at the totality of the evidence.

I consider that the Appellant's appeal fails on all three of the somewhat different ways of approaching my decision that I have just indicated. In the light of the fact that my decision is the reverse of the conclusion that I reached in the Castle case, which HMRC has decided for one reason or another not to appeal, I will summarise the facts that I consider explain and justify the different conclusion.

I should say that I have very considerable sympathy with the Appellant for two reasons.

Whilst I think that it was proper for me to consider the case, even in the absence of the Appellant, I am sure that the Appellant will consider it most unsatisfactory that the case should be decided largely on the evidence of two witnesses, and by a Tribunal Judge who had no previous experience of a case that has been in dispute for nine years, and in which the Case Stated was issued in 2006.

Secondly, and I concede that this point has no technical relevance, I do find it most unfortunate that these status cases appear to involve calculating liabilities for NICs on the wrong amount, and imposing them on the wrong person, all in the context that in an industry such as the building industry, the Appellant will claim (as he has done repeatedly) that his competitors were operating as he had done, and they are not being subjected to a nine-year battle with HMRC. There was no relevant evidence in this case, but I consider that I am making a very reasonable assumption when I say that workers engaged on a CIS basis are generally paid more than they would be paid if the same workers, doing the same work, were regarded from the outset as employees. Self-evidently the exposure to concede paid holidays and to pay employees when away from work through illness etc., coupled with the NIC liability of the employer to pay Class 1 secondary contributions "on top of salary" would all result in the salary being considerably lower than the rate of pay paid to self-employed sub-contractors. Thus, in a case such as the present, the retrospective calculation of liability to NICs is realistically based on more pay than would have been paid had the outcome of the case been known in advance. And, since the employees' pay would be reduced to reflect the employer's liability to pay the secondary contributions, the employees would in a sense have suffered the cost of the NICs had the conclusion been known in advance. Equally, on the reasoning that the worker was initially prepared to work on the basis that he would not have the various state benefits available to employees associated with the payment of primary and secondary Class I contributions, and the greater state pension in retirement, when the employer loses its status appeal, it follows that the employees become entitled to those benefits that they were not expecting, regardless indeed of whether HMRC manages to collect the primary and secondary NICs from the employer.

My decision to hear the case

I was faced with a difficult decision as to whether or not to proceed with the hearing. It is certainly unsatisfactory to proceed with a hearing designed to establish additional facts in the absence of the Appellant, but I was strongly pressed by the Respondents to hear the case, as arranged, and the reasons why I decided to do so were as follows:

The principal objection that the Appellant appeared to have to the hearing was the very feature that the case had been remitted by the General Commissioners to the Special Commissioners. Whether this was at the instigation of the General Commissioners or the Respondents, it was clear that the case had been remitted in a valid manner. In any event on the dates fixed for the hearing, 26 and 27 March 2009, the General Commissioners had either already been abolished under the Tribunal reforms, or they certainly would have been abolished 4 days later. Thus the prospect of giving any thought to whether the General Commissioners could play any further role in the case was completely academic. It was self-evident that the further hearing would either be before me as a Special Commissioner or before me or another member of the First-Tier Tax Tribunal in that capacity.

The proposition that the Appellant could not attend a hearing in London when he lived in Essex seemed somewhat weak, particularly when he had represented himself in the High Court appeal in London.

Whilst it was indeed unfortunate that the hearing had been booked at a time when a friend might have assisted the Appellant in presenting further facts, it seemed curious that the Appellant had been prepared to represent himself before the High Court, where the issues were legal issues, but was not prepared to attend a hearing before me when the prime purpose of the meeting was to ascertain further facts. The Appellant himself and his wife had given evidence before the General Commissioners, the other witnesses who had given evidence in person emerged not to have been engaged by the Appellant at any of the material times, and the two individuals who were to give evidence in person to me (who had been engaged at the relevant time) had provided witness statements both for the hearing before the General Commissioners and for the hearing before me, all of which had been seen by the Appellant, albeit neither accepted nor disputed by him.

The hearing before me had been booked on the dates in question for five months. I have not the slightest doubt that had the Appellant notified the Respondents or the Office of the Special Commissioners that the date was not convenient, and that had been indicated when the date was suggested, another date would have been provided. When however this had not been indicated in advance, and 4 or 5 people were ready to attend for the Respondents, and two witnesses were present to give their evidence, it seemed unacceptable to adjourn the hearing when the Appellant had effectively boycotted it for either confused or weak reasons.

Finally I was told that the Appellant had also been responsible for delaying the case, though since this allegation appeared to be being made by both parties, I was not particularly influenced by this point.

The findings by the General Commissioners and the basis of their decision

The material facts found by the General Commissioners were as follows:

• The Appellant's business was that of providing groundwork and civil engineering services to main contractors;

• The terms of engagement between the Appellant and his workers were in oral form only.

• Any worker who explicitly sought or requested engagement as an employee was refused.

• The terms of engagement of workers did not require the Appellant to pay his workers in the event of lack of work due, for instance, to bad weather or lack of demand or for lack of necessary preparation by others.

• Whilst the evidence before me cast doubt on this point, the General Commissioners accepted that the workers were engaged by the Appellant "to work on specific contracts with main contractors, rather than on a continuous basis". There is no doubt however that they were not engaged on a weekly or monthly basis regardless of whether there was work for them to do.

• Hand tools were usually provided by the workers, and materials and heavier plant and equipment by the Appellant or the main contractors by arrangement with the Appellant.

• Workers considered themselves to be self-employed and working on their "own account", and would work elsewhere if they could obtain more suitable or attractive work elsewhere. One witness, Mr. Morris, who gave evidence before me as well as before the General Commissioners, was obviously an exception to this feature because he considered himself to be "just one of Mr. Wright's workers", and not to be self-employed.

• Errors and mistakes were often required to be rectified by the worker, at his expense.

• The Appellant obtained all the work with the main contractors himself. Since he often had a number of projects running, he could not work himself on each site on a full-time basis. He decided, from the list of potential workers that he maintained, which workers were suitable for which project by reference to their skill, experience and availability.

• The Appellant arranged vans to transfer workers from pick-up points to sites and back.

• The Appellant usually gave initial instruction to the worker himself and thereafter the precise on-site instructions lay "with the on-site Foreman".

• The workers could leave their engagement without notice.

• The Appellant could and did move workers from one job to another.

• None of the workers had their own public liability insurance.

• Workers were paid on a time basis, regardless of whether the Appellant made a profit or loss on any job, and no workers were ever paid on a piece-work basis.

• The workers received no sick pay, holiday pay or pension benefits, although it was contended by two of the witness that permission was sought from the Appellant in advance before they took holidays.

• No training was given to workers. The main contractor or the supplier of equipment would give appropriate instruction for the use of plant and machinery.

• The provision of safety equipment and protective clothing was left to the individual worker.

• Finally, obligations regarding Health and Safety Regulations were seen to be the responsibility of the main contractors.

The General Commissioners stated at one point that the Appellant's business was to provide labour to main contractors. I consider that this finding was a slight mis-statement, because numerous other findings made it quite clear that the Appellant's business was to undertake with main contractors to provide sub-contract groundwork services, using his own workers to do this. The feature that the Appellant was regularly working on the various sites, and giving instruction to his workers, and many other findings of fact make it clear that the Appellant's business was not just to provide workers to main contractors. I will refer below to a certain significance of this point.

I will not record the respective contentions of the parties before the General Commissioners. The Appellant appeared simply to have contended that the workers were self-employed and not employees. The Respondents had rather understandably advanced numerous points as to why they contended that the workers were employees.

The decision of the General Commissioners was given fairly shortly in the following terms:

"We accepted the contention of the Appellant that the relationship of the workers with the Appellant was one of a contract for providing their services but not a contract of employment and we therefore uphold the Appeal of the Appellant and reduce the Regulation 49 Determinations and the Section 8 Assessments to nil.

"We concluded that the terms of engagement were oral only and further that there was no formal contract protecting the worker nor any minimum requirement to pay the worker irrespective of demand or weather and that payment for the workers' service was effected strictly on a work done basis. We based this conclusion upon the evidence of the workers K M Burridge, B M Wheaton and the evidence of the Office Manager B D Savage who confirmed the method and terms of engagement in each and every case.

"We felt that the Respondents did not produce sufficient evidence to counter the oral evidence of the Appellant and his witnesses."

HMRC's appeal to the High Court and the decision of Mr. Justice Lewison

As already indicated, HMRC appealed against this Decision of the General Commissioners to the High Court, and Mr. Justice Lewison allowed the appeal and remitted the case to the General Commissioners for further findings of fact. The relevant parts of his decision are as follows, the following extract appearing immediately after Mr. Justice Lewison had quoted the middle of the three paragraphs that I have just quoted in paragraph 15 above:

"There are therefore three reasons given by the Commissioners. The first is that the contracts were oral. This is an irrelevant consideration and a wholly inadequate reason. As the Employment Rights Act makes clear, a contract of employment may be oral or written. It need not even be an express contract because where necessary a contract of employment can be implied. The second reason, namely that there was no formal contract protecting the workers seems to me to be no more than a restatement of the first reason and equally irrelevant for the same reasons. The third reason, that there was no minimum requirement to pay the worker irrespective of demand or weather and payment to the worker was effected strictly on a work done basis, may be relevant to the question of whether there was some umbrella agreement between Mr. Wright and the workers governing the period when they were not actually working, but it does not seem to me to bear on the question whether or not they were Mr. Wright's employees when they were actually working.

"The real question which it seems to me the General Commissioners ought to have answered but did not was whether Mr. Wright had sufficient day to day control over his workers to make them his employees. That was the key issue that arose".

Much of the remainder of Mr. Justice Lewison's decision was concerned with the question of whether control over workers exercised by the main contractors could be material in determining whether the workers were or were not employed by the Appellant. In this regard he dwelt on the distinction between the older case of Global Plant Limited v. Secretary of State for Health and Social Security [1971]3 All ER, and the more recent decision of the Court of Appeal in Bunce v. Post Worth Limited [2005] IRLR. In the former case where a driver of earth-moving machines worked under the control of the site foreman of the customer of Global Plant, which was the company that had contracted with and engaged the driver, Lord Widgery made the following observations:-

"It is perfectly true that the control on the site was not exercised by [Global Plant's] representative but by the representative of their customer, the site foreman. For my part I cannot see this makes any difference, and in my judgment the position would be exactly the same if the company had sent its own representative to the site there to transmit to Mr. Summers the necessary instructions from the client company."

Mr. Justice Lewison made the following observations in relation to the passage from Lord Widgery's decision that I have just quoted:-

"I do not regard that passage as laying down any principle of law. It is, if I may respectfully say so, a decision on the facts and one which would depend upon a finding that the site foreman was in effect the agent of the employer. But that is not the usual way in which building contracts are structured. The usual position is that the site foreman is nominated by the main contractor. I would not regard the mere fact that workers were told what to do by a site foreman as amounting to control by Mr. Wright."

Mr. Justice Lewinson then referred to the Post Worth case where the company, Skyblue, supplied agency workers to various clients, including Carillion Rail. Although the worker's contract with Skyblue required the worker to comply with the end user's lawful instructions, Keene L.J. said:-

"The law has always been concerned with who in reality has the power to control what the worker does and how he does it. In the present case, during the periods when the appellant was working on an assignment, it was the client, the end-user, who had the power to direct and control what he did and how he did it. That is not in dispute. Skyblue could not exercise such control over the appellant."

It accordingly followed that the worker was not under the control of Skyblue, and was not thus an employee of Skyblue.

In this case, Mr. Justice Lewinson remitted the case to the General Commissioners in order that they could ascertain whether the Appellant had sufficient rights of control over the workers to justify the conclusion that they were his employees. In this context he did state, in the following passage, that on what he had so far gathered himself, he supposed that the Appellant did not have sufficient right of control to justify the conclusion that the workers were employees of the Appellant:-

"So here, in my judgment, the fact that Mr. Wright selected workers was not enough either. Mr. Wright did drive the operatives to the site himself or provided transport, but that, as it seems to me, was only to get them to the workplace and cannot amount to control over the actual work that they did. The initial instructions were given by Mr. Wright usually but the site foreman decided both the hours of work and gave precise on-site instructions. Instruction in the use of machinery was given by the main contractor or the supplier of the machinery, not by Mr. Wright, and Health and Safety compliance lay with the main contractor."

Naturally, however, he said that "it is not for me to substitute my view of the facts for the view which [the Commissioners] take", and it was to ascertain those material facts that he remitted the case back to the Commissioners.

The evidence given before me

Evidence was given before me by two witnesses on behalf of the Respondents, namely Mr. Anton Morris and Mr. Chris Elliot.

Before summarising their evidence, and to a large extent quoting from their Witness Statements, I should make three points clear. First as I have already mentioned, these Witness Statements were sent to the Appellant so he did know what the witnesses were going to say. He made no comment on the Statements so that they could not be treated as agreed Witness Statements.

The second point is that since the Appellant was not present to cross-examine the witnesses, I endeavoured to pursue any points that appeared to need clarifying. One obvious question, since the two witnesses had both been engaged at a time when neither had had any experience whatever in the building industry, was to ask whether they had been picked by the Respondents because they were unusual, with perhaps the majority of the workers being experienced builders. To this I was told that some people had or had acquired more experience, as indeed both these men doubtless did after 2 ½ years and 11 months service respectively, but I was nevertheless told that the majority of the workers engaged were equally inexperienced when engaged. In other words I was entitled to take their circumstances and their evidence as being likely to be representative, rather than out of the ordinary.

The third point to make is that there is a natural assumption in cases such as this that workers who give evidence for HMRC may have some sort of grievance against the person or company for whom they worked. Both witnesses replied to my question as to whether they had fallen out with Mr. Wright by saying that they had not done so. In general I add that everything that they said sounded to me to be honest, and indeed realistic.

Mr. Morris said that he worked for Mr. Wright for 2 ½ years between September 1999 and February 2002. He was engaged over the phone at a time when he had no prior experience in the building industry.

Mr. Morris (and the same applies to Mr. Elliot, to save repeating matters) confirmed that he was always collected for work at a pick-up point, and returned at the end of the day. Mr Morris said that he never needed to find his own way to the site, "particularly as I did not always know what site I would be going to until the day. If I was ever late, I would be left behind and sometimes, if that happened, I would not be picked up the next day."

Mr. Morris' first job involved laying slabs at the Barbican. He said that "the main contractors would discuss with Mr. Wright how they wanted the slabs to be laid and Mr. Wright would then tell me and the rest of the gang what we were to do. As I had limited experience in laying slabs I was advised on how to lay the slabs by other members of the gang. I also recall Mr. Wright was present at the site most of the time and that he went round telling people what jobs they should do. This was the case in most jobs where Mr. Wright would go on to either tell someone what to do or he would leave instructions with someone he trusted, telling them what they should do or/and what they should tell us."

In describing his next project, at a school in Romford, Mr. Morris again said "I was picked up in the morning and driven to the site. Mr. Wright was there most of the time as this was a big job and he again would tell us what to do and allocated the work. Paul Gallagher also worked at the site with me and when Mr. Wright was not there I would take my instructions from him. Other members of the gang also helped me with the work (digging work, man holes, laying slabs and drainage work) as they had much more experience than I did.

By way of a general description of work patterns, Mr. Morris made the following comments:-

"As far as I was aware Mr. Wright was the one who put the teams together on this task and with most of the other jobs and the gangs stayed the same until completion of the task. At the same time Mr. Wright would be the one to tell us what work we were required to do and in the event that something urgent needed to be done Mr. Wright would pull me or any members of the gang off and tell us what else needed to be done. If Mr. Wright was not around the site managers of the main contractors (e.g. French Kier, Jacksons) would tell us what to do or if anything was wrong. If something was not to their liking it would have to be redone in our normal working day and I would still only receive my normal rate of pay."

Without quoting further passages from Mr. Morris' Witness Statement, I confirm that he indicated that Mr. Wright was generally on the sites where Mr. Morris worked for very significant periods, and secondly Mr. Morris was shifted from one site to another without prior notice.

As regards holidays, for which Mr. Morris of course received no payment, he said that:-

"Before I was allowed any time off I had to give Mr. Wright advance notice of around one or two weeks at least and he had to agree the time off. I recall only being allowed two days off for the birth of my daughter and being advised by Mr. Wright that if I had any longer then I would not have a job to return back to. During this time off I never arranged any cover for someone else to do my work, although this matter was never discussed with Mr. Wright: as far as I was aware it was up to Mr. Wright to arrange such cover."

In relation to "continuity of work", Mr. Morris said that:-

"I recall that there were the odd days where the work dried up: as such Mr. Wright failed to pick me up. At the time I was unsure of what was happening. However, I did not look for alternative work as usually the next day or so I was picked up and sent to another job."

Mr. Elliot's Witness Statement and evidence were broadly similar. Again, he commenced the period of about 10 or 11 months of work, with the observation that "after a brief telephone conversation where I advised Mr. Wright that I had no experience in construction work, Mr. Wright confirmed that I could start working with him as a labourer the next day. …………[Mr. Wright] said that he would arrange for me to be picked up at home or some designated point. I was also asked to come along with a pair of toe capped boots."

All Mr. Elliot's remarks relating to "control" were similar to Mr. Morris' evidence. For instance he said that:-

"Whilst working at the Waltham Abbey site Mr. Wright attended the site occasionally but never stayed the full day. During that time he would tell us what needed to be done. However when he was not there Paul Gallagher would do this as he was the most senior worker. The site agent would speak to Mr. Wright or Paul Gallagher and then would tell the lads what to do. There was no opportunity to say they weren't doing the work; they were told what to do."

In relation to transfers from one site to another, Mr. Elliot said in relation to his transfer from one site to another that "I was not advised of this change in job until the day, when a man I had never met before picked me up with a van advising me that I would be working with him. I did not know where I was going or what I would be doing until I got to the site. At the site the company managed the job and told us what to do."

In relation to his next job, a paving job, Mr. Elliot said that "At this site Mr. Wright was present, keeping an eye on the job as well as getting involved in the work."

Mr. Elliot continued:-

"The next job I remember doing was the Basildon Hospital. The site manager told Mr. Wright's brother in law what needed doing and the brother in law would then tell us what to do. My work involved general cleaning up. I was at this site for between six weeks to two months. I was there for the majority of this time but I was sent to the Waltham Abbey job for a couple of days. Other jobs that followed included tarmac work, labouring at the Broomfield hospital and another place I cannot recall as we were moved around to a lot of other sites to do work where and when necessary."

As regards the time of work, Mr. Elliot said that:-

"My working days were Monday to Saturday. I was given no option with regards to working on Saturday. ……

I was always picked up for work and most of the time I would not know what site I would be attending and what I would be doing until I got to the site. I got my instructions on a daily basis and was picked up at a set time of 6.00 a.m. I was always dropped off in the evening by the van."

I should also quote the following passages from Mr. Elliot's Witness Statement.

"On some occasions Mr. Wright would pick me up, take me to a specific site and tell me what to do and who to speak to when I got to the site. Most of the time I was given general instructions by Mr. Wright but if there were no specific duties from Mr. Wright I would go to the site manager. My job would change at least three times a day. At no time did we discuss my employment status.

"In order to take any time off I was told to ask Mr. Wright and as far as I was aware we were expected to give him at least 2 weeks' notice; if possible much longer. On one occasion I phoned in sick; however later that morning, Mr. Wright arrived at my house and started banging on my door for me to open it. When I opened the door he said tht he was only checking to see if I was really ill. I was not paid for the sick days or any day that I had off. ………

"While working with Mr. Wright I had no choice as to where I go and what I did. It was clear while I was working with him that I had to do as I was told. On one occasion because I refused to go to a particular site as I felt the site was unsafe, Mr. Wright fired me. The driver of the van was told not to bring me home on that day and I had to find my way back home. However Mr. Wright's wife rang me up later on and asked me to start work again which I did. I was fired on various occasions but asked to return the next day.

In general working with Mr. Wright meant that you had to do what you were told and that you could not come and go as you pleased. You had to work with others and sometimes had to work over-time. Even when I booked advance notice for time-off Mr. Wright would sometimes forget the arrangements and still come to my house banging on the door or phone to see what was going on. There was no possibility of me coming and going as I pleased even though I would not be paid for my days of absence."

My decision

As I indicated in paragraphs 6 and 7 above, I will give my decision in three distinct ways.

First, Mr. Justice Lewison instructed the General Commissioner, a task that I have inherited, to ascertain whether the facts demonstrated that the workers worked under the control of Mr. Wright. Mr. Justice Lewison considered this to be the vital matter in this case. I have not the slightest hesitation in saying that on the evidence that was given to me, the two workers who gave evidence, and implicitly the others since it was reasonably clear that these two workers were fairly representative, did work under the control of Mr. Wright. The legal point that it is merely the power to exercise control, not the actual exercise of control that matters, is irrelevant in this case since I find that Mr. Wright regularly exercised either personally, or through other trusted workers of his, control over his work-force. Accordingly I decide, on the basis of Mr. Justice Lewison's direction as to the significance of control that the workers were employees of Mr. Wright, and on this basis, this Appeal is dismissed.

Mr. Justice Lewison dedicated a considerable portion of his decision to the suggested feature that the law had moved on since the Global Plant case, and that it was now clear that if a worker, engaged by A, was sent to work for B, and it was B who controlled the worker, that control could not be material in determining whether the worker was an employee of A. This point is not now strictly material since I have already decided that in many material respects the workers in this case were plainly controlled by Mr. Wright, and not by the main contractors. However I should comment on the split in rights of control between Mr. Wright and the main contractors, and say why I consider that any degree of control that might have been exercised by main contractors does not sway my decision against the proposition that the workers were controlled by Mr. Wright.

It seems to me that this case has been slightly confused, as I said in paragraph 13 above, by the seeming finding of fact by the General Commissioners that the Appellant's business was to provide labour to main contractors. This finding actually influenced the decision of the General Commissioners since in the very opening statement of their decision, which I quoted in paragraph 15 above, they concluded that "the relationship of the workers with the Appellant was one of a contract for providing their services". In fact it was perfectly clear that this was not correct. Most of the other findings of fact, quite apart from the obvious reality of the situation, make it clear that the Appellant's business was to perform groundwork services on a sub-contract basis for main contractors, and in performing that work the Appellant used his own workers, and indeed controlled them. Just as in the Castle case it was clear in this case that main contractors perform the role of project managers and coordinators, and they often sub-contract everything from ground-work to scaffolding, bricklaying, joinery, plastering, plumbing work, electrical installations, tiling and decorating to others. It is not the case that those other entities or traders are simply supplying workers who work entirely in the business of the main contractor, as if the suppliers were just the type of agency that Skyblue plainly was in the Post Worth case. Those suppliers would be performing their respective trades under contract to do so with the main contractor, or so far as is material in this case, the Appellant was performing the trade of doing the groundwork on a sub-contract basis.

This point and distinction between the two candidate roles performed by the Appellant seems to me to be very significant to the relevance of control. For the reality is that in a case of this nature, the control exercised by the main contractors is essentially to coordinate the various sub-contractors, and to make it clear to each sub-contractor what must be done in accordance with the building plans, and in what order different jobs must be done. In the performance of their various sub-contract roles it is each sub-contractor who exercises the control that is material for tax and employment purposes, and the overall coordination seems to me to be fairly irrelevant to these tax and employment tests.

This can be illustrated perhaps by taking the example of the dealings between the main contractor and three sub-contractors respectively attending to the plastering, kitchen fitting and electrical work. In those various sub-contract firms, there may be employees who have been employed for years by the respective firms and I suggest that the material control over which employees do what work, and in what detailed sequence is up to their "direct bosses". Nevertheless the main contractors will at all times be instructing the foremen of the sub-contractors into which room the kitchen equipment is intended to be installed, and precisely where under the plans the various items are to be located, and so on with the plastering and the electrical installations. But this overall coordination seems to me to have nothing, or at least very little, to do with the control over the workers who are working directly in the sub-contracted organisations.

I accept that the position is quite different where a person's trade or a company's trade is simply to supply workers to work directly in the business of a third party. In that situation the supplier of the worker may be responsible for supplying a satisfactory worker for the type of work contemplated, but since the worker is to work directly in the trade of business of the entity to which his services are provided, and the supplier will have no clue as to what it is intended that the worker will be required to do, the agency type of case is quite different from the sub-contract case with which this Appeal is concerned.

On this basis I consider that it is the control by the Appellant that is material and that coordinating control exercised by the main contractors, generally to Mr. Wright himself, his brother in law, or to one of his trusted foremen, is not relevant to the control over Mr. Wright's workforce. Consistent with the sub-contracting reality, it was Mr. Wright, his brother in law or his foreman or foremen who exercised most of the direct control over Mr. Wright's workforce.

Mr. Justice Lewison directed me to consider the question of whether Mr. Wright exercised control over his workers, and in paragraph 40 above I concluded that he did, and that on the basis of the importance attached to this control test, the workers were indeed employees of Mr. Wright and that the appeal was dismissed on that basis.

In fairness to Mr. Wright, however, I think that it is appropriate to test the employment question more widely to see whether on an alternative basis I arrive at the same conclusion. After all, several of the most recent authorities have stressed that numerous points are relevant in considering this status question. Some will be more important than others in one case and less significant in another, and it is often important to look at all these factors and then stand back and consider the status issue in a general and broad manner. Furthermore, recent authorities have somewhat indicated that the "own business" test is perhaps a more critical one than the "control" test, and so I do think that I should consider the status issue in this case on the wider basis, really to check whether my initial decision is confirmed by the alternative approach.

There are certainly many factors in this case that were similar to the facts in the Castle case in which I concluded that the bricklayers and the majority of the other workers were not employees. I will set out in paragraphs 55 to 57 below why I consider that my contrary decision in this case is not in conflict with the Castle decision, albeit that I do accept that there are some similarities between the two cases.

Whilst the "own business" and the "control" tests are perhaps the most important factors in determining the status point that I must consider, the third of Mr. Justice MacKenna's tests set out in Ready Mixed Concrete (South East) Ltd v. Minister of Pensions and National Insurance 1 QBD [1068] 433 was to look at "the other provisions of the contract [to see whether they were consistent] with its being a contract of service." In the Castle case I adopted the approach of Mr. Justice Park in Usetech Ltd v. Young (HMIT) (2004) 76 TC 811 to such matters as the obligation to provide work, and the obligation or lack of obligation to pay a worker in a short period where there was no available work to be "touchstones" of an employment contract. In other words, the feature of only being paid for work done, and not being paid when there was no available work was not decisive in indicating that the status was not that of employment, but it was nevertheless unusual for these terms to be present in employment contracts.

Viewing matters generally, however, I have no doubt that I arrive at the same conclusion that the workers in the present case were employees.

The two most significant factors are that the workers were not in business on their own account in the sense of taking risk and of drawing up some form of accounts; and they did work under the control of Mr. Wright. Since the two witnesses that gave evidence before me were both new to the building industry at the time they were engaged by Mr. Wright, and they were engaged in a casual manner without much attention to what their skills were, it seems inconceivable to argue that they were in business on their own account. My understanding was that these facts were fairly typical.

Although I accept the findings of the General Commissioners that the workers could leave their assignments without notice, and in the evidence before me it is plain that Mr. Wright considered that he could terminate engagements without notice, the actual working hours appeared to have been fixed. Men had to work 6 days a week at the material time, and their hours were set by virtue of the fact that they were all taken to, and collected from, site by Mr. Wright's vans. Although the workers were not paid for time-off, holidays, or when ill, both witnesses before me made it clear that there was virtually no flexibility to take time off, even though it was appreciated that they would not be paid when not working. The "banging on the door" examples and the feature of Mr. Wright checking to see that a worker was genuinely ill all confirm this. The General Commissioners found as a fact that the workers were engaged for projects, and not for set periods. I quite follow that none of the workers had guaranteed periods of engagement, but when the witnesses before me were engaged before they knew where they would work, and sometimes they were switched to different sites without notice (sometimes working on three sites in a single day) the proposition that they were engaged for specific projects seems very dubious. Mr. Morris said that he just considered himself to be "one of Mr. Wright's workers", and it seems to me that his understanding of the situation was indeed correct.

It accordingly seems to me that, even on the "standing back" approach of looking at all factors generally, the workers in this case were employees.

I will now list the distinctions between this case and the Castle case. I am not doing this in any effort to re-confirm the decision in that case, which I understand HMRC does not propose to appeal. I am comparing the two cases simply to show that my decision in this case is not inconsistent with that in the Castle case.

In giving the decision in the Castle case, I admitted that I had found the case to be a borderline one, so that it should not be surprising that several material differences in the facts in this case tip the balance of the decision against the Appellant.

The following are the differences in fact that seem to me to be material:-

• In the Castle case, the vast majority of the workers were bricklayers, and all of the bricklayers were experienced bricklayers. This led me to say that in one sense, the workers did have a trade or business in that they were all established and professional "brickies", and there was that constant thread running through all their different engagements when they worked either for Castle or for one of the other competing firms. I accepted that they did not have a full trade in the sense of taking commercial risk in pricing jobs etc, and I did not say that this more modest sense in which they had "a trade" was a "knock-out" blow. I was quite familiar with the numerous examples, such as that of the employed solicitor, where someone with a professional qualification could very easily be an employee. But nevertheless the reality of the "brickies' trade", coupled with the other terms of service which were extraordinarily flexible in the Castle case, struck me as being significant.

By contrast, in this case, the workers were essentially labourers, and many had no prior experience in the building industry before being engaged. There is thus no sense whatever in which they had a wider trade or skill that prevailed over their particular assignment with Mr. Wright.

Notably in the Castle case the trainee bricklayers, as distinct from the experienced men, were always engaged as employees, generally for their first two years of engagement with Castle, and the employees, but not the experienced bricklayers who were regarded as self-employed, were ferried to and from site by Castle. The two witnesses in this case would plainly have been in the "trainee" capacity, had they been engaged by Castle rather than by Mr. Wright, and so they would have been engaged as employees at Castle.

• In the Castle case, the factor that I considered more significant than the ability of either party to terminate the relationship without notice was the alleged feature that workers could choose their hours, and regularly did so. This seemed improbable and inefficient, but I quoted statistics of widely different hours worked, and no explanation was given to me to explain away the apparent feature that people could come and go as they pleased. The very reverse appears to have been the case here. Beyond being taken to and from work by van, the workers appeared to have to work the hours set by Mr. Wright, including Saturdays for instance, whether they liked the hours or not.

• The reality in relation to "control" was very different. Even the compelling evidence in the Castle case of a witness who was trying to assist HMRC was that he had been a brickie for 20 years and no-one was going to tell him how to lay bricks. Control was exercised to see that walls were built in accordance with the plans, and in the coherent order to tie in with the main contractor's plans, but the brickies received no instruction as to how to lay bricks. In the present case, the workers were labourers, many of whom were inexperienced, and there was evidence that Mr. Wright often attended sites and gave instruction to the workers, and left instructions with his foremen or his brother-in-law.

• As just mentioned in paragraph 53 above, the hours worked in the present case appear to have been set, and set rigidly, by Mr. Wright. Odd as I said that I found this, the time-sheets in the Castle case supported the odd point that the workers could work the hours they pleased. Features such as the van transport to take workers to and from site, and the fact that they were regularly switched from one engagement to another, and sometimes did not know where they were going until they arrived on site, all emphasised the control by Mr. Wright.

• In a borderline case, it is well established that the intentions of the parties can be of significance. In the present case, it seemed that it was Mr. Wright who decided that people would be engaged as CIS sub-contractors, and they had no choice. In the Castle case, there was considerable evidence that this status was intended and desired by both parties to the contracts. All the evidence about a walk-out or a threatened walk-out when Castle tried to accept HMRC's claim that the brickies should be employees emphasised that, for several reasons of flexibility, as well as the greater basic pay, the workers positively agreed with Castle that the relationship was a flexible one not amounting to employment.

58. I accordingly reach the conclusion on several different bases that this Appeal must be dismissed. I am still conscious of the points that I made in paragraphs 8, 9 and 10 above, which leave me having considerable sympathy for Mr. Wright, but I cannot allow these points to influence me to make what I would regard as a wrong decision.

HOWARD M NOWLAN

TRIBUNAL JUDGE

RELEASE DATE: 20 April 2009