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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Easyway Umbrella Ltd, R (On the Application Of) v His Majesty's Commisioners for Revenue and Customs  EWHC 3368 (Admin) (21 December 2023)
Cite as:  EWHC 3368 (Admin)
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KING'S BENCH DIVISION
B e f o r e :
| THE KING
(on the application of
EASYWAY UMBRELLA LIMITED)
|- and -
|HIS MAJESTY'S COMMISIONERS FOR REVENUE AND CUSTOMS
Official Court Reporters and Audio Transcribers
5 New Street Square, London, EC4A 3BF
Tel: 020 7831 5627 Fax: 020 7831 7737
MR JOSHUA CAREY and MR SAM WAY (instructed by HMRC) appeared on behalf of the Respondent.
Crown Copyright ©
MR JUSTICE KERR:
"Easyway is an umbrella provider. An umbrella provider is the name commonly given to companies which engage employees and provide them to clients. This is attractive to clients who do not regard themselves as the employer. The umbrella company will receive funds from the client, usually via a recruitment agency and pay the worker, after deducting its fees. A practice has grown up of umbrella companies paying a minimal salary to its employees and topping up the salary with loans which HRMC regard as being earnings attracting PAYE and, therefore, regards tax avoidance. By contrast, Easyway has deliberately chosen to differentiate itself from this practice by paying more than minimal salaries and operating a bonus scheme which results in fully taxable payments. Easyway's business began in January 2022 as a result of an increased demand in the market for umbrella providers following the changes to the IR35 legislation (that placed the obligation for determining employment status onto private sector employers in certain circumstances). ."
"(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) avoidance or reduction of a charge to tax or an assessment to tax,
(d) avoidance of a possible assessment to tax,
(e) deferral of a payment of tax or advancement of a repayment of tax, and
(f) avoidance of an obligation to deduct or account for tax."
"Description of the proposal or arrangements:
Individuals provide services to end clients as employees of Easyway Umbrella Limited.(EUL)
Employees receive part of their EUL remuneration at a rate close to the National
Minimum Wage or National Living Wage which is subject to Income Tax and National Insurance.
Employees receive the balance of their remuneration without the deduction of Income
Tax or National Insurance on the basis it does not count as income as it's a loan, credit, or
The authorised officer suspects the proposal or arrangements shown above are a relevant proposal or relevant arrangements. This is because the arrangements enable or might be expected to enable any person to obtain a tax advantage. An equivalent individual who did not enter the arrangements, working for the same end clients, would have the right to receive 100% of the gross contract value relating to the services they have provided net of income tax and National Insurance Contribution. By entering into the arrangements, users receive a portion of their remuneration without the deduction of Income Tax or National Insurance Contributions. The aggregate amounts received are significantly higher than the income they would have received as employees, had they not participated in the arrangements. It is therefore evident that the scheme puts the user in an economically similar position but with less tax to pay.
Secondly, the obtaining of the tax advantage is the main benefit, or one of the main benefits that arises from the arrangements. There are no non tax related benefits of participating in these arrangements that are comparable with the tax advantage. In the absence of any evidence of any other commercial benefits of using the arrangements it is reasonable to suspect that the obtaining of a tax advantage is at least one of the main benefits that might be expected to arise from the arrangements."
"If an authorised officer intends to publish information under this section that identifies a person, an officer of Revenue and Customs must
(a) notify the person, and
(b) give the person 30 days from that notification in which to make representations about whether or not the information should be published."
"Individuals provide services to end clients as employees of Easyway Umbrella Limited (EUL). Employees receive part of their EUL remuneration at a rate close to the National Minimum Wage or National Living Wage which is subject to Income Tax and National Insurance. Employees receive the balance of their remuneration, disguised as a loan, credit or other payment, without the deduction of Income Tax or National Insurance.
HMRC considers the untaxed payments as normal income, and tax and National Insurance contributions are payable. HMRC have previously published information on umbrella companies offering to increase your take home pay Spotlight 45. HMRC are aware that some umbrella companies operate more than one scheme, eg a standard compliant scheme and a non-compliant scheme. HMRC advise employees of EUL to familiarise themselves with the guidance and to satisfy themselves that the correct amount of tax is being deducted on their income."
The first ground: unfairly failing to provide an opportunity to make representations
" the emphasis ought to be on the consequences of non-compliance, and posing the question whether Parliament can fairly be taken to have intended total invalidity."
The second ground: inadequate and unlawful reasons for publishing the section 86 notice
"Employees receive the balance of their remuneration, disguised as a loan, credit or other payment, without the deduction of Income Tax or National Insurance."
The third ground: irrational decision to publish the section 86 notice
"First, as I have explained, many employees choose renumeration significantly above the level provided by the statutory minimum wage. Second, the loans are not in any way disguised. They are genuine loans. The third serious problem with the Defendant's characterisation of our business, which is one of omission, is that the Defendant fails to refer to the bonus pool at all and this leads to the corresponding point that the bonus payments will be fully taxable when they are made."
The fourth ground: violation of article 1, first protocol to the European Convention on Human Rights by publishing the section 86 notice
"It must be shown that the interference complies with the principle of lawfulness and pursues a legitimate aim by means that are reasonably proportionate to the aim sought to be achieved. This final question focuses upon the question whether a fair balance has been struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights" [and] "a margin of appreciation must be left to the national authorities."
Section 31(3C) and (3D) of the Senior Courts Act 1981