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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Christianuyi Ltd & Ors v Revenue And Customs  EWCA Civ 474 (19 March 2019)
Cite as:  STI 853,  STC 681,  EWCA Civ 474,  3 All ER 178,  WLR(D) 176
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ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
(MARCUS SMITH J and JUDGE T HERRINGTON)
 UKUT 10 (TCC)
Strand, London, WC2A 2LL
B e f o r e :
(SIR ERNEST RYDER)
LORD JUSTICE FLOYD
LADY JUSTICE ROSE
| (1) CHRISTIANUYI LIMITED
(2) FANNING SOCIAL CARE LIMITED
(3) HADDASSAH LIMITED
(4) DR. JACEK TRZASKI LIMITED
(5) JONNY TOOZE PHYSIOTHERAPY SERVICES
- and –
|THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS
Akash Nawbatt, Q.C. and Kate Balmer (instructed by the General Counsel and
Solicitor to HM Revenue and Customs) for the Respondents
Hearing date: 5 March 2019
Crown Copyright ©
Lady Justice Rose:
i) The First Appellant Christianuyi Ltd provides the services of Dr Osamwonyi who is a forensic medical examiner;
ii) The Second Appellant, Fanning Social Care Ltd provides the services of Ms Fanning, a social worker;
iii) The Third Appellant, Haddassah Ltd provides the services of Ms Ayodele, a social worker;
iv) The Fourth Appellant, Dr Jacek Trzaski Ltd provides the services of Dr Jacek Trzaski, a doctor; and
v) The Fifth Appellant, Jonny Tooze Physiotherapy Services Ltd provides the services of Mr Tooze, a physiotherapist.
"the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client."
"(1) A company is a "managed service company" if-
(a) its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons,
(b) payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services,
(c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and
(d) a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals ("an MSC provider") is involved with the company."
"(2) An MSC provider is "involved with the company" if the MSC provider or an associate of the MSC provider —
(a) benefits financially on an ongoing basis from the provision of the services of the individual,
(b) influences or controls the provision of those services,
(c) influences or controls the way in which payments to the individual (or associates of the individual) are made,
(d) influences or controls the company's finances or any of its activities, or
(e) gives or promotes an undertaking to make good any tax loss.
(3) A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity.
(4) A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services).
(5) Subsection (4) does not apply if the person or an associate of the person-
(a) does anything within subsection (2)(c) or (e), or
(b) does anything within subsection (2)(d) other than influencing the company's finances or activities by doing anything within subsection (2)(b)."
The Upper Tribunal's decision
i) it benefited financially on an ongoing basis from the provision of the services of the individuals and so fell within section 61B(2)(a): see , ,  and ;
ii) it influenced or controlled the way in which payments to the individuals were made by the Appellants and so fell within section 61B(2)(c): see ;
iii) it influenced or controlled the Appellants' finances or any of its activities and so fell within section 61B(2)(d): see .
"Section 61B(1)(d) sets out a perfectly straightforward, two stage, test for determining whether a company is or is not an MSC provider:
(a) First, does the putative MSC provider promote or facilitate the use of a company?
(b) Secondly, if so, does that company provide the services of individuals?"
(1) HMRC's construction: that, in order for a company to be an MSC provider, the company's business must be the business of promoting or facilitating the use by individuals of companies through which the individuals will provide their services to clients; the putative MSC provider does not need also to promote or facilitate the services themselves;
(2) The Appellants' construction: that, in order to be an MSC provider, a company must promote or facilitate the services provided by the companies the use of which it has promoted or facilitated.
"2.12 In an MSC scheme the worker obtains work engagements, usually via an agency, in the normal way. The worker supplying services usually takes no part in the on-going management or financial control of his MSC and is typically not a director of the company (but rather a worker-shareholder). Instead, the MSC scheme provider handles payments between the agency and the MSC, deducting a fee for the work it carries out and arranging for the payment of the worker. The worker is often unaware of the details of the arrangement or its implications.
2.13 The marketing of MSC schemes emphasises that the worker will not be involved in the running of the company - they simply receive payments for their services [there follows a series of quotations from MSC scheme provider websites]"
"… the presence and the role of the MSC scheme provider is a distinguishing characteristic of the MSC. The MSC scheme provider markets MSC structures and makes them available to workers and also has an ongoing role in the administration and management of the company".
"4.5 … The new legislation will define an MSC scheme provider by reference to their business, which is facilitating the provision of the services of individuals and companies.
4.8 By focusing on the business of an MSC scheme provider in this way, the definition will not catch those who provide services to a service company in the course of a different type of business, such as the provision of accountancy services. Nor for the same reason, will it include employment agencies because their business is not that of being an MSC scheme provider.
4.9 This definition will be more effective than the current draft because it focuses on the role of the MSC scheme provider as the distinguishing characteristic of the MSC and it will enable HMRC to focus on the small number of MSC scheme providers rather than looking at each service company separately."
Lord Justice Floyd
Sir Ernest Ryder, Senior President of Tribunals