[2011] UKFTT 379 (TC)
TC01234
Appeal number TC/2010/05385
National Insurance Contributions – categorisation of earners – construction industry – whether bricklayer on CIS4 self-employed or employed earner – found to be self employed
FIRST-TIER TRIBUNAL
TAX
PAUL ANTHONY BELL Appellant
- and -
TRIBUNAL: JOHN N. DENT (JUDGE)
ELIZABETH POLLARD (MEMBER)
Sitting in public at North Shields on 24th March 2011
The Appellant in person
Mrs Oliver for the Respondents
© CROWN COPYRIGHT 2011
DECISION
The Facts
2. There was no dispute on the facts.
HMRC Submissions
The Appellant’s submissions
(a) Section 230(1) of the Employment Rights Act 1996 states an employee means “an individual who has entered into and works under a contract of employment”. Section 230(2) of the ERA 1996 states a contract of employment means a contract of service whether express or implied and whether oral or in writing.
(b) The economic reality test as set out in Ready Mixed Concrete Limited v Minister of Pensions and National Insurance 1968, Carmichael v National Power Plc 1999.
(c) The control tests set out in Yewens v Noakes 1880.
(d) The business test formulated in the case of Market Investigation v The Minister of Social Security 1969
(e) HMRC’s leaflet IR56.
21. They referred to the working day being controlled by MECL and the requirement to sign in and out of MECL’s office, to the control of what work was done, and to the fact that the only tools supplied by the appellant were his tradesman’s hand tools. His working day was also controlled. They referred to the payment being made weekly with payslips at an hourly rate less tax deducted in accordance with the CIS4 card, and to the appellant being unable to employ his own people or bring others on site to do the work that he was required to undertake.
22. He would receive regular monthly training in relation to health and safety issues from MECL. He paid Class 4 National Insurance contributions annually and Class 2 contributions weekly. He employed an accountant to deal with his taxes at the end of the year.
23. It was submitted that he had no financial risk or access to any profits, did not invoice MECL, and could not delegate work. The site foreman would deal with incorrect work, disagreements and other issues. not make a written submission, and the appellant’s submissions are taken from oral information given to the Tribunal.
The Law
24. Section 8(1)(b) of the Social Security Contributions (Transfer of Functions etc) Act 1999 permits an officer of the Board to decide whether ...a person is or was employed in employed earner’s employment for the purposes of Part V of the Social Security Contribution and Benefits Act 1992 (industrial injuries)
Case Law
25. The Tribunal was referred to the case of Ready Mixed Concrete v Minister of Pensions and National Insurance [1968] 2 QB 497 where Mackenna J considered what was meant by a contract of service. This required three conditions to be fulfilled, namely
(i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master
(iii) The other provisions of the contract are consistent with its being a contract of service
26. Mackenna J went on to say that to find where the right under (ii) resides it is necessary to look first to the express terms of the contract, and if they deal fully with the matter one may look no further.
27. HMRC also referred the Tribunal to Commissioners for HM Revenue and Customs v Philip John Wright [2007] EWCH 526(Ch). The issue is whether the the “employer” has sufficient day to day control over his workers to make them his employees. The facts in that case were similar to those in this case, except that the employer provided transport to the site, and no training was given.
29. Yewens v Noakes (1880) 6 QBD 530, addressed the question of the division between master and servant. In the view of the Tribunal these issues were fully argued in Ready Mixed Concrete v Minister of Pensions and National Insurance.
The fundamental test to be applied is this: “Is the person who has engaged himself to perform these services performing them as a person in business on his own account?” If the answer to that question is 'yes' then the contract is a contract for services. If the answer is 'no' then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining' [whether there is a contract of employment] 'nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.
The Tribunal took this into account in its findings.
Findings
31. The Tribunal found that in this case there was a contract for services between MECL and the appellant which governed the relationship between the parties. The contract was similar to many in the construction industry where workers move from employer to employer on short term contracts, and where the worker considers himself to be self employed.
32. The appellant took the contract on the basis that it was self employment, as that was all that was on offer. He was able to terminate the agreement without notice.
33. In reality it is necessary for the main contractor to have overall control of the work being done, as he must build to the specification required in his own contract. However, provided the work is done to the standard required and in the position required, he exercises no other control over the manner in which it is done. The Tribunal found that the mere fact that workers were told what to do by a site foreman does not amount to control by MECL.
34. The fact that the times of work were specified by MECL does not, in the finding or the Tribunal amount to control. For health and safety reasons, it is sensible to have set site times and in the finding of the Tribunal, this does not demonstrate the sort of control necessary to demonstrate that the appellant was an employee rather than performing a contract for services.
35. The condition relating to control, needs to be sub-divided as indicated by McKenna J. The first element is the power of deciding the thing to be done. As it remains within the choice of MECL to decide whether to offer the opportunity of work on a particular occasion and within the choice of MECL to decide whether to offer work to the contractor for the particular occasion, this choice is whether to enter into a contract at all, rather than to decide what is to be done under the terms of any such contract. If the contract is entered into, the agreed work is provided. It is open to MECL to request the contractor to move to a different part of the site. It was open to the appellant, if he wished, to refuse to accept the change, and to look for work elsewhere. Thus MECL is not in a position to dictate to the contractor what work needs to be done.
36. The next element of the control condition is the power of deciding the way in which the work is to be done. It is clear from the evidence that the nature of work to be done is dictated by the main contractor, QCCL. QCCL can decide the precise order in which the work is done, although clearly the broad overall pattern needs to be followed. MECL supervises the quality of the work, but the contractor uses his acquired skill in ensuring that quality is maintained. The Tribunal did not view this as amounting to control of the way in which the contractors carry out their task. We did not consider that this is “control” in the sense referred to by McKenna J. As already mentioned, he was looking at “control in a sufficient degree to make that other master”. Rules of general application to everyone, in whatever capacity they were present on QCCL’s premises, cannot be seen as control of the nature being considered by McKenna J. In order to be taken into account in establishing the nature of the particular relationship, such control must be a specific feature of that relationship. These general rules are thus of no assistance in assessing whether MECL had control over the way in which the contractors did their work. On the question of control of the way in which the work was to be done, we found that MECL did not exercise control over this element of the contractors’ work.
37. The next part of the control condition is power of deciding the means to be employed in carrying out the work. QCCL provided the power tools and the materials for the work. The appellant provided his own small tools of the trade. As the construction was being carried out in accordance with a specification, there was no scope for MECL or the contractor to make any decisions in relation to it. Thus this element of the control condition is not met.
38. The remaining elements of the control condition are the power of deciding the time when and the place where the work is to be done. In relation to place, there was no choice as to where the work was done, as this could only be on the site being developed. MECL and QCCL could decide on priority within the site, but this was a matter of practicality in ensuring that the construction proceeded in the most efficient manner. However, the restrictions did not arise from the terms of the relationship between MECL and the appellant; indeed, they applied equally to all the contractors. We found that MECL was not able to control the decision as to place.
39. The Tribunal took into account the case of HMRC v Philip John Wright (2007) EWCH 526 where the Judge commented that he did not regard the fact that workers were told what to do by, for example, a site foreman, amounted to control by the engager.
40. In relation to the parties’ declared intention that the relationship should be one of self-employment, the appellant was effectively arguing that such a declaration ought to be disregarded if the remainder of the contractual terms governing the realities of the relationship showed the relationship of employer and employee. In Massey v Crown Life Assurance Co [1978] 2 All ER 576 the Court of Appeal indicated that in cases of doubt it was open to the parties to stipulate what the legal situation between them should be. Thus the way in which they drew up their agreement and expressed it might be a very important factor in defining what was the true relation between them.
41. On our view of the contractual terms, if the position is open to a degree of doubt, the parties’ declared intention are a relevant factor, as mentioned by Lord Denning MR in Massey. Taken together with all the other terms and circumstances, it supports the overall conclusion which we have already reached, that the appellant was self-employed and not engaged under a contract of service.
42. The Tribunal took into account HMRC’s leaflet IR56. This is merely commentary on the law, and the Tribunal took into account the cases which set out in details what the law is
43. In view of these findings, the Tribunal determined that the appellant was not an employed earner with MECL on 13 June 2005, and the appeal is dismissed.
44. The Tribunal made no order as to Costs
45. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.