Tyler Security Limited v The Commissioners for HMRC [2025] UKFTT 1250 (TC)

[2025] UKFTT 01250 (TC)Case No TC09663
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 15 to 17 July 2025Date Judgment date: 16 October 2025
[Taylor House]
Appeal reference: TC/2022/12739
INCOME TAX – Determination under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 – specialist dog handlers engaged by Appellant for its end-clients – the application of the Agency Rules – sections 44 – 47 of the Income Tax (Earnings and Pensions) Act 2003 –whether the Agency legislation applies to the Appellant – whether the dog handlers personally provided services to the end-clients – whether there was supervision, direction and control by ‘any person’ – whether there was a failure to make the required payments as required by regulation 67G of the PAYE Regulations – yes – Appeal dismissed
Before
JUDGE NATSAI MANYARARADR CAROLINE SMALL
Between
TYLER SECURITY LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Andrew Young of Counsel, instructed by Lexlaw Solicitors & Advocates for AppellantMr Christopher Stone KC and Mr Josh Neaman of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Introduction

[1]This appeal concerns the application of ss 44 to 47 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) (“the Agency legislation”) to specialist dog-handlers supplied by the Appellant (‘Tyler Services Limited’) to its end-clients, for the purpose of providing security and search-dog detection services at events and venues. If s 44 ITEPA applies, then the payments made by the Appellant to the dog-handlers are to be treated as ‘earnings’ for income tax purposes.[2]The Appellant appeals against a determination (“the Determination”) made under reg. 80 of the Income Tax (Pay As You Earn) Regulations 2003 SI 2003/2682 (“the PAYE Regulations”), on 11 March 2022. The sum assessed was £133,615.60 (reduced to £88,503.70 following review HMRC invite the Tribunal to vary the Determination to £88,503.70 (as varied by the review). ) and relates to the 2017-18 tax year (“the relevant period”). The basis of the Determination was that the Agency legislation applied in respect of the dog-handlers (s 44(3) ITEPA). HMRC have estimated the Determination to the “best of their judgment”,as referred to in reg. 80(2) of the PAYE Regulations. The Appellant has not challenged whether the Determination was made to the best judgment. The Appellant did not apply to amend its Grounds of Appeal, despite being invited to do so prior to the hearing.Furthermore, the Notice of Appeal purports to include an appeal against estimated National Insurance Contributions (“NICs”) in respect of liability to pay Class 1 NICs for the 2016-17 tax year, in the sum of £66,692.68. Such a ground of appeal is not valid because only a protective writ has been issued, and not a “Section 8” decision under Society Security Contributions (Transfer of Functions, Etc) Act 1999.

The issue

[3]The sole issue to be determined is whether the Agency legislation applies to the engagement of the dog-handlers during the relevant period. The appeal concerns only those dog-handlers who were not paid through an intermediary company. This, in turn, requires consideration of whether the dog-handlers personally provided services to another person, under a contract, and subject to the supervision, direction and control (“SDC”) by any person.[4]In this Decision, the legislation and case law are cited so far as is relevant to the issue in dispute.

Burden and standard of proof

[5]Section 50(6) TMA provides that if, on an appeal, it appears to the tribunal that an appellant is overcharged by an assessment other than a self-assessment, the assessment shall be reduced accordingly but “otherwise the assessment … shall stand good.” Pursuant to s 50 (6) of the Taxes Management Act 1970 (“TMA”), the burden of proof is on the Appellant to show that the Agency legislation does not apply.[6]The standard of proof is the ordinary civil standard; that of a balance of probabilities.

Authorities and documents

[7]The authorities to which we were specifically referred by the parties included:(1) Van Boeckel v C & E Comrs [1981] STC 290 (‘Van Boeckel’);(2) C & E Comrs v Pegasus Birds Ltd [2004] STC 1509; [2004] EWCA Civ 1015 (‘Pegasus Birds (2)’);(3) Ready Mixed Concrete (Southeast) Ltd v Minister for Pensions and National Insurance [1968] 2 QB 497 (‘Ready Mixed Concrete’);(4) Moher (t/a Premier Dental Agency) v HMRC [2012] UKUT 260 (TCC), [2012] STC 1356 (‘Moher’);(5) Adecco UK Ltd v HMRC [2018] EWCA Civ 1794, [2018] STC 1722 (‘Adecco’);(6) Yarmouth v France (1887) 19 QBD 647 (‘Yarmouth v France’);(7) K5K Ltd v HMRC [2022] UKFTT 217 (TC) (‘K5K’);(8) Express & Echo Publications Ltd v Taunton [1999] IRLR 367 (‘Express & Echo Publications’);(9) HMRC v Talentcore Ltd (t/a Team Spirits) [2011] UKUT (TCC) (‘Talentcore’); and(10) Professional Game Match Officials Ltd v R & C Comrs [2024] UKSC 29 (‘PGMOL’).[8]The documents to which we were referred were:(i) the Hearing Bundle consisting of 949 pages;(ii) the Authorities Bundle consisting of 254 pages;(iii) the Appellant’s Supplementary Bundle consisting of 558 pages;(iv) HMRC’s Skeleton Argument dated 24 June 2025; and(v) the Appellant’s Skeleton Argument dated 10 July 2025.

Background facts

[9]The Appellant was incorporated on 30 October 2007. The Appellant provides specialist search detection services for its end-clients at venues and events. The searches are primarily aimed at detecting explosives, firearms, pyrotechnics and narcotics. Under the contracts between the Appellant and its end-clients, the Appellant agreed to provide teams of search-dog operatives, and their dogs. In return, the fee paid to the Appellant was calculated based on the number of search-dog operatives and dogs provided, and the number of hours that they worked. The Appellant’s business model incorporates these dog-handlers as integral components of the security services it delivers to its clientele.

Dramatis personae

[10]Mr Rowland Stone was appointed Director of the Appellant on 30 October 2007. Mr Stone previously worked as a police officer for 32 years. Shareholding is split between Mr Stone and his wife, on a 60:40 basis.[11]Mr Frank Thornborrow offers specialist dog detection services, together with a trained search dog. His clients primarily include security companies. He worked as dog-handler in the City of London Police for 16 years, and retired in 2014. Since then, he has been working as a dog-handler in the private sector.[12]Mr Cefyn O’Ryan is the director of Baseline Security Services Ltd (“Baseline”), which offers specialised security search services to security companies. Baseline was incorporated on 29 December 2022, which is after the relevant period. There is no evidence to the effect that Mr O’Ryan was otherwise engaged by the Appellant during the relevant period.[13]Mr Goode is a dog-handler who worked for the Appellant.

The end-clients

[14]The Appellant’s clients include Wembley National Stadium (“the FA”), the All-England Lawn Tennis Club (“Wimbledon”), Tottenham Hotspur Football & Athletic Co. (“Spurs”), Chelsea Football Club (“Chelsea”), Fulham Football Club (“Fulham”), London Stadium 185 (Queen Elizabeth Olympic Park), Laing O’Rourke (“Tideway”), and several other minor clients. By way of example, the ‘service’ provided by the Appellant is set out in the following terms (“the Fulham contract”):
“BETWEEN: FULHAM FOOTBALL CLUBLimited, a company registered in England … (the "Fulham"); and TYLER SECURITYLimited, a company registered in England under number 6412278 and VAT Registered whose registered office is at 23 Copthorne Avenue... (the "Service Provider"); … FULHAM FOOTBALL CLUBLimited, a company registered in England … (the "Fulham"); and SEARCH DOG OPERATIVES” mean those appropriately qualified individuals engaged by the Service provider to provide the Services;” “SERVICES means the provision by the Service Provider of Search Dog Operatives at the locations in accordance with this Agreement and as further described in Schedule 1.”

FULHAM FOOTBALL CLUBLimited, a company registered in England … (the "Fulham"); and

[15]Invoices, with the fee calculated on the number of “dog teams” (i.e., a combination of dog and handler), are provided by the Appellant to the end-client. An example of one such invoice is to “BMB JV” is as follows:
“Supply of one Narcotics Search Dog & Handler at £240 BMB JV West Site … Task Order No. 3 of 10 13 February 2020”
BMB JV West Site Task Order No. 3 of 10 13 February 2020”[16]Given the trading patterns of its clients, the Appellant neither maintains a workforce, nor owns or maintains its detection dogs or transport. The Appellant became an Approved Contractor Scheme (“ACS”) with the Security Industry Authority (“SIA” The SIA is a non-departmental public body responsible for regulating the UK’s private security industry and regulates the compulsory licensing of individual operatives, including search dog handlers. Individuals must obtain an SIA license in order to work as a security operative, where the work being performed is part of a ‘contract for services’ and involves a ‘licensable activity’. It is a voluntary scheme, as there are a number of standards that approved contractors need to meet, including tax compliance. ) in March 2014. The Appellant subcontracts its dog detection services to specialist businesses.

The dog-handlers

[17]The Appellant engaged 33 dog-handlers during the relevant period. The dog-handlers are required to have attained a National Association of Security Dog Users (“NASDU”) Level 3 qualification for “Passive/Proactive Drug Detection Dogs” and/or a NASDU Level 4 qualification for “Explosive Detection Dogs”. In addition, they need to have a valid NASDU Level 3 or 4 Certificate for each detection dog that is deployed. The certificate is for a “Handler and Search Dog” team. NASDU and the National Canine Training and Accreditation Scheme (“NCTAS”) both provided “Training and Accreditation” to the handlers and their dogs. The handlers, and their dogs, had to undergo re-accreditation every year. NASDU also required the handlers to do a certain number of hours of training per month. Records were kept so that if the end-client wished to see the training record, the Appellant could request it from the handler and pass it on. This was specific to the handler; rather than handler plus dog. Retraining was required every three years. The training involved upskilling and refreshers. It took three days and culminated in a test over five different papers. The handlers were also required to be SIA-licensed.[18]One contract between the Appellant and a dog-handler is described as a “Contract for Services (self-employed)” and identifies the job-title “Doghandler” as follows:
“Contract for Services (self-employed) The parties to the contract: Mr Rowland Stone, Managing Director of Tyler Security Limited … You may be required to work at any of the Tyler security Limited’s clients in the UK on a temporary or permanent basis. Date of employment commences: Job Title: DOG HANDLER”
The parties to the contract: Mr Rowland Stone, Managing Director of Tyler Security Limited Date of employment commences: Job Title: DOG HANDLER”

Date of employment commences:

[19]The standard “Terms and Conditions” at provide, inter alia, that:
“Supplier Personnel: the Supplier’s employees or agents who may be provided to perform the Services and who shall be under the direction, supervision and control of the Supplier.”
[20]The dog-handlers attended venues personally, but did not contract directly with the Appellant’s end-clients. They were, however, an indispensable part of the service provided by the Appellant to its end-clients in order for effective searches to be carried out. The Appellant was required to ensure compliance by the dog-handlers with applicable laws, regulations, orders, directions and codes of practice. It was the Appellant’s responsibility to enforce codes of practice and see that the dog-handlers followed directions.[21]The Appellant had a “Disciplinary Procedure” in place in respect of the dog-handlers. If a handler committed misconduct on site, Mr Stone would investigate the matter. If the end-clients complained that searches were not being carried out in the agreed manner, Mr Stone would investigate in order to understand whether there was a reasonable explanation for what had occurred. Where things were not done according to the necessary standards, remedial training might be offered, or Mr Stone might simply not use the handler again. The Appellant also provided the handlers with two months’ initial training (which they paid for), and provided further periodic training. This was part of the NASDU licensing process. This training had an element of assessment; handlers or dogs could fail and be withdrawn. The handlers would, upon arrival at a client’s venue, sometimes be made to sign a document containing “Health and Safety” rules, rules regarding social media posts, and other similar rules.[22]Wimbledon, for instance, has site rules which include health and safety requirements. PPE has to be worn as a health and safety requirement. If this was not done, it would be picked up by the cameras at the venue. The Appellant was, generally, required to ensure the handlers complied with the terms of the contract between the Appellant and the end-client. If a loss was caused by a dog-handler engaged through the Appellant, it was the Appellant’s insurance against which a claim would be made. While the dog-handlers had insurance, it did not cover matters such as a missed explosive, or a dog biting a member of the public at a venue. The handler and the dog operate as a team, so it was not possible for someone else to carry out searches with the handler’s dog, or vice-versa.[23]The Appellant notified the dog-handlers of a job by sending them a “Job Sheet”, as follows: HANDLER DATE LOCATION 1. … 2. … 21st November 2020 THFC POINT OF CONTACT TIME OF PARADE CONTACT NO. TBC CLIENT COMPANY HOURS REQUIREMENTS EXPLO

REQUIREMENTS

[24]Mr Stone selected which handlers to send the job sheets to. The job sheet informed the handlers that work was available for a particular client, at a particular time and place, for a particular number of hours. The job sheet also set out the type of work required at a high level (e.g., “Explo” for an explosive dog), and any other requirements. The handlers are required to provide at least three days’ notice if they are unable to accept the ‘deployment’, and are assumed to have accepted it if they do not say they are unable to do it. The handlers invoice the Appellant based on the number of hours that they have worked.[25]Some clients requested that the handlers follow a particular “Dress Code”. Mr Stone preferred the handlers to have a ‘corporate’ appearance, stating that:
“all the clients that we have insist on a corporate dress”
[26]A failure to adhere to dress code was confirmed to reflect badly on the Appellant by Mr Stone. The client would be entitled to direct a handler who was not properly attired to change into suitable clothing.[27]Some venues had “Inductions” provided by the end-client. For Tideway, this lasted three days and the handler received a certificate at the end. Part of the induction was spent on scenarios. The handler was tested on what they would do in particular situations. For Fulham, this was a briefing on matchday, with a health and safety element. For handlers unfamiliar with the venue, someone would talk them through matters, show them around, and explain how things were done in that particular venue. Mr Stone might also attend the induction.[28]The dog-handlers were part of a larger security operation run by the clients. Each venue had a “Security Manager” (or equivalent role). Their contact details were given on the job sheets, as follows: EXPLO HANDLERS DATE LOCATION 1. … 2. … SATURDAY 20TH JUNE 2020 Olympic Park POINT OF CONTACT TIME OF DEPLOYMENT CONTACT No. … CLIENT COMPANY ANTICIPATED DURATION REQUIREMENTS REQUIREMENTS 29. PHOTOGRAPHIC ID MUST BE WORN, PPE MUST BE WORN AT ALL TIMES…”[29]There was a hierarchical command structure at the venues, involving the security manager, those working in the control room and the rest of the client’s security apparatus. The security manager is responsible for security on site and generally determines what searches would be done. The “Search Manager” (or the equivalent role in the client’s security set-up) supervises and checks that the searches are being done as they are meant to be done, in liaison with the “Search Adviser”. They liaise not only with the dog handlers, but with the staff responsible for body searches. Sometimes the police would determine where searches were needed if there had been a threat. That information would be cascaded down to the dog-handlers through the security manager. Where something went wrong, and there was no search adviser on site, the handlers would liaise with the security manager. If requirements changed on the day, that would be communicated by the security manager to the handlers.[30]The dog-handlers might also be briefed on the work they were required to do at the start of each day. Sometimes there was a written “Briefing”. Where there was no written briefing, the handlers would speak to the security manager upon arrival. Sometimes, a ‘lead handler’ would attend the briefing and then cascade any information down to the other handlers. Ultimately, the information came from the end-client.[31]The handlers were given a “Search Sheet” or “Tasking Sheet” detailing what searches to carry out, where, by what time, and in what order. A full description of the tasks allocated to individual dog-handlers was contained on the individual tasking sheets. The search adviser directed the handlers as to the tasks they were to perform. The handlers did not have discretion to do different tasks to those shown on the tasking sheet. The tasking sheets were signed and returned to the search adviser, confirming that all had been done as required. If tasks were not done, it was the search adviser’s job to re-task so that they were done. At Wimbledon, the handlers were also required to inform the control room when some of the tasks were completed.[32]Sometimes the Appellant would also provide a search adviser who discussed the client’s requirements with the client, and devised a search ‘matrix’. On the day, the security adviser functioned as a ‘fixer’. The decision as to how many dogs were needed, and how long the searches would take, was made by the clients in conjunction with the search adviser. On the day, the search adviser would issue directions to the handlers at the venue by giving them the tasking sheet and telling them what they needed to do. If something went wrong and there was a search adviser on site, the handlers would liaise with them. The search adviser may also re-allocate tasks between dog-handlers.[33]The dog-handlers followed the directions of the end-client as to what kinds of searches to carry out, and where to do them, provided that those directions were safe and not unreasonable. The search advisers directed the individual handlers as to the tasks that they were specifically required to perform. The dog-handlers followed the directions of the end-client as to the manner of the searches, once again provided that those directions were reasonable. Clients might also have their own protocol as to what to do in case of a suspect package. Upon making a find, but before starting a search, the handlers would have to call the site control room and inform them of the find.

HMRC’s investigation

[34]On 10 September 2020, an “educational due diligence meeting” was held between Mr Stone, the Appellant’s agent, the SIA representative (Mark Tierney) and HMRC officers. The purpose of the meeting was to educate the Appellant on the Agency legislation, with a view to compliance. During the meeting, Mr Stone explained that the Appellant had always specialised in dog handling security and specialised searches. He further stated that:
“... Tyler provide the services of the Dog Handlers to the venues, the venues will then pay Tyler for the services and Tyler in turn pays the Dog Handlers for such services.”
[35]The Appellant was advised that it needed to apply the Agency legislation to comply with HMRC and ACS criterion. This entailed the dog-handlers that the Appellant engaged being treated as employees for tax and national insurance purposes. Mr Stone agreed to put the dog-handlers on the Appellant’s payroll by 30 December 2020.[36]On 4 October 2020, Mr Stone signed the notes to the meeting.[37]By an email, dated 12 October 2020, Mr Borton (on behalf of Mr Stone), stated that:
“We have setup a payroll with our accountants and the majority of the handlers accept that they have to move onto a PAYE/NI scheme. There are a number of queries to be resolved but I believe our accountants can deal with these. However, one question that has popped up with the majority of our handlers and their accountants is; can we not start this at the beginning of the new tax year i.e. 6th April 2021?”
[38]Following an extension granted to 6 April 2021, a further extension was provided to 6 July 2021 for the Appellant to apply the Agency legislation and account for the PAYE and NICs due in respect of the payments made to the dog-handlers. The Appellant continued to give assurances that it would comply with the Agency legislation.[39]On 1 July 2021, the Appellant’s solicitors advised HMRC that, in their opinion, the Appellant was not an agency but supplied dog detection services to its clients. They further advised that the Appellant did not supply individuals as temporary workers, or supplies for individual personal services.[40]On 6 July 2021, HMRC sought confirmation as to whether the Appellant would be applying the Agency legislation and fully operating PAYE/NI on the dog-handlers it currently engaged, in addition to any new dog-handlers it would engage in the future. HMRC advised that should the Agency legislation not be complied with within the agreed timeframe, then HMRC would advise the SIA of the Appellant’s non-compliance with Clause 4.2.1 of the ACS requirements (as discussed in the educational due diligence meeting). A compliance check would thereafter be opened with a view to recovering the arrears of PAYE/NI over the past six years, including interest and potential penalties.[41]On 9 July 2021, the Appellant confirmed it would not be complying with the Agency legislation.[42]On 1 February 2022, given that the Appellant had not applied the Agency legislation, a compliance check was opened. Documentation was requested in order to assist with HMRC’s enquiries.[43]On 3 March 2022, the Appellant was advised that, as a precautionary measure to protect HMRC’s rights to collect unpaid amounts of NI and interest (which must be collected within six years of the date that they were due), action would need to be taken through the County Court Judge Zaman previously determined that the county court claim forms issued by HMRC are not before the Tribunal. The county court claim forms are not the decisions before the Tribunal and extend to years beyond that which has been appealed - they refer to the years 2017-18 through to 2020-21. .

The Determination

[44]On 11 March 2022, HMRC issued the Determination.[45]On 21 March 2022, a formal request for a statutory review of the decision was received and the postponement of tax due of £133,615.60 was actioned on 25 March 2022.[46]On 14 April 2022, the Appellant appealed to HMRC.[47]On 13 June 2022, the Appellant’s solicitors confirmed that their only dispute was in relation to Condition 1 of Part 2 of the PAYE Regulations.[48]On 17 June 2022, HMRC issued their view of the matter letter.[49]On 23 June 2022, a letter was issued to the Appellant, upholding the decision to issue the Determination on the basis that the Agency legislation applied.[50]On 16 September 2022, the Appellant notified the appeal to the First-tier Tribunal (‘FtT’).[51]On 20 January 2023, HMRC served their Statement of Case.[52]On 19 April 2024, HMRC wrote to the FtT and the Appellant stating, inter alia, that the Grounds of Appeal do not make any reference to best judgement, or indicate an intention to challenge HMRC’s use of best judgement under reg. 80(2) of the PAYE Regulations in respect of the Determination.[53]On 29 April 2024, HMRC requested that the Appellant provide amended Grounds of Appeal. The Appellant did not amend its Grounds of Appeal.

Relevant law

[54]In order to put the parties’ respective contentions into context, we start with the relevant statutory provisions. The relevant law, so far as is material to the issue in this appeal, is as follows:

ITEPA

[55]The version of s 44 ITEPA in force from 6 April 2003 was substituted by the Finance Act 2014 (Part 1, Chapter 2, s 16(2)). From 6 April 2014, the relevant legislation is found within Chapter 7, Part 2, ITEPA.[56]Section 44 ITEPA provides that:
“44 Treatment of workers supplied by agencies (1) This section applies if— (a) an individual (“the worker”) Personally provides services (which are not excluded services) to another person (“the client”), (b) there is a contract between – (i) the client or a person connected with the client, and (ii) a person other than the worker, the client or a person connected with the client (“the agency”), and (c) under or in consequence of that contract – (i) the services are provided, or (ii) the client or any person connected with the client pays, or otherwise provides consideration, for the services. (2) But this section does not apply if –– (a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or (b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter. (3) If this section applies –– (a) the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and (b) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment, [...]” (a) an individual (“the worker”) Personally provides services (which are not excluded services) to another person (“the client”), (b) there is a contract between – (i) the client or a person connected with the client, and (ii) a person other than the worker, the client or a person connected with the client (“the agency”), and (c) under or in consequence of that contract – (i) the services are provided, or (ii) the client or any person connected with the client pays, or otherwise provides consideration, for the services. (a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or (b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter. (a) the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and (b) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment, [...]”
[57]Section 45 “Arrangements with agencies” provides that: “If ––(a) an individual (“the worker”), with a view to Personally providing services (which are not excluded services) to another person (“the client”), enters into arrangements with a third person, and(b) the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker, any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment.” (a) an individual (“the worker”), with a view to Personally providing services (which are not excluded services) to another person (“the client”), enters into arrangements with a third person, and (b) the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker,[58]Section 47 “Interpretation of this Chapter” provides that:
“(2) In this Chapter “excluded services” means (a) services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or (b) services provided wholly – (i) in the worker’s own home, or (ii) at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services. (3) For the purposes of this Chapter “remuneration” — (a) does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but (b) subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.” (a) services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or (b) services provided wholly – (i) in the worker’s own home, or (ii) at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services. (a) does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but (b) subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.”

The PAYE Regulations

[59]Regulation 80 provides that:
“80. Determination of unpaid tax and appeal against determination (1) This regulation applies if it appears to HMRC that there may be tax payable for a tax year ... by an employer which has neither been – (a) paid to the Inland Revenue, [...] (2) HMRC may determine the amount of that tax to the best of their judgment, and serve notice of their determination on the employer. [...] (5) A determination under this regulation is subject to Parts 4, 5, 5A, and 6 of TMA (assessment, appeals, collection and recovery) as if – (a) the determination were an assessment, and (b) the amount of tax determined were income tax charged on the employer, and those parts of that Act apply accordingly with any necessary modifications.” (a) paid to the Inland Revenue, (a) the determination were an assessment, and (b) the amount of tax determined were income tax charged on the employer, and those parts of that Act apply accordingly with any necessary modifications.”
[60]Section 50 TMA provides, inter alia, that:
“(6) If, on an appeal notified to the tribunal, the tribunal decides – [...] (c) that the appellant is overcharged by an assessment other than a self-assessment, the assessment ... shall be reduced accordingly, but otherwise the assessment ... shall stand good. (7) If, on an appeal notified to the tribunal, the tribunal decides – [...] (c) that the appellant is undercharged by an assessment other than a self-assessment, the assessment ... shall be increased accordingly.” (c) that the appellant is overcharged by an assessment other than a self-assessment, the assessment ... shall be reduced accordingly, but otherwise the assessment ... shall stand good. (c) that the appellant is undercharged by an assessment other than a self-assessment, the assessment ... shall be increased accordingly.”
[61]The FtT’s jurisdiction on an appeal against a reg 80 determination is, therefore, statutorily provided under s 50 TMA.

The evidence and the key submissions

[62]The documents for the hearing (set out at para. 8 above) comprised pleadings, documents relating to HMRC’s investigation, and appeal correspondence. The Hearing Bundle also contained the statements of the Appellant’s witnesses.[63]We heard evidence on behalf of the Appellant from Mr Stone, Mr Thornborrow and Mr O’Ryan. We considered the evidence given by all of the witnesses to be of assistance to us in understanding the background, as set out in the “Background Facts”. A number of admissions were made by the Appellant’s witnesses, which we will set out in our “Discussion” later.

The Appellant’s submissions

[64]Mr Young’s submissions can be summarised as follows:(1) The dog-handlers do not fall within s 44(1)(a) ITEPA. This is because, as a matter of fact, a sub-contractor is not an individual or ‘worker’. The subcontractor is making a composite supply of dog detection services to the Appellant, which go beyond the supply of an individual worker and should not be categorised as personally provided service. Some of the Appellant’s sub-contractors are VAT registered and HMRC accept that they make a standard-rated supply of services. This is inconsistent with the Determination that there is a supply of ‘labour’.(2) Section 44(2) ITEPA excludes s 44 where the service provided is not subject to SDC. The evidence is that the dog detection services are supplied under the control of the subcontractor, and not the Appellant or the operators of the venue where services are performed.(3) The services do not fall within s 45 as the sub-contractor is not an individual worker with a view to personally providing service to another person since the services are composite in nature, and may be taxable supplies for the purposes of VAT. Given that the Appellant supplies dog detection services to its clients, and not workers, it is not an agency for s 44 purposes. A subcontractor may provide a different handler and dog, as may be necessary, and this is inconsistent with a contract of service: Express & Echo Publications.(4) The services of dog detection are not personally performed by a dog-handler. The Appellant exercises no control over the dog; nor does it exercise control as to how services are performed. The dog performs services under the control of its handler. Accordingly, the service is not provided by a worker, as defined by s 230(3)(b) of the Employment Rights Act 1996. The services of dog and handler are indivisible. The dog and handler cannot be interchanged as the pair are certified as a single unit. There cannot be a contract of employment in these circumstances.(5) The sub-contractors who train both handler and dog, and maintain the dog at great expense, are in a business on their own account: Ready Mixed Concrete.(6) HMRC’s manual relies upon Peter Gibson LJ’s ruling that where a person is not required to perform his services personally, the relationship is not one of worker and employer. It follows that there can be no agency contract as defined and, as such, the Agency legislation (s 44) does not apply for tax purposes: Talentcore.[65]At the start of his submissions, Mr Young sought to advance the argument that the Determination had been raised capriciously. He could not, however, gainsay the fact that the Appellant’s Grounds of Appeal did not raise the issue of whether the Determination was to ‘best judgment’.

HMRC’s submissions

[66]HMRC did not call any witnesses as the issue of ‘best judgment’ was not a live one (in accordance with the unamended Grounds of Appeal).[67]Mr Stone’s submissions can be summarised as follows:(1) Section 44(1)(a) does not require an obligation - whether contractual or otherwise - on the worker’s part to provide services personally. Rather, it refers simply to the fact of whether the worker did personally provide services: K5K, at [199(1)].(2) The Appellant is incorrectly focussing on the service that it provides to its clients, rather than the statutory question of whether the relevant individual has personally provided services to the client; irrespective of whether another thing (e.g., a form of equipment) was also provided at the same time.(3) For the purposes of s 44(1)(a), the search dogs are treated like any other piece of specialist security equipment operated by trained personnel. Working dogs are treated as ‘plant’ on the basis that they are an apparatus with which the trade is carried on, that has an expected life of two years or more. HMRC’s Guidance “CA21220” specifically cites the example of a guard dog: see also Yarmouth v France, in which a horse was found to be plant.(4) The dog detection services provided by the Appellant depend entirely on the handler’s work. The simple fact is that in respect of every engagement for which the Appellant was paid, a dog handler did personally provide services to the end-client, along with the dog.(5) The Appellant is wrong, as a matter of law, to state that supplies of ‘labour’ are not VAT-able supplies. It is well established that supplies of staff are taxable supplies for VAT purposes. In Moher, the taxpayer was held to be making a taxable supply of medical staff. The taxpayer had submitted that the supply was of medical services, and so was exempt.(6) The fact that the ‘agency’ - within the meaning of s 44(1)(b)(ii) - may be making a taxable supply for VAT purposes does not affect the application of the Agency Rules. In Adecco, the taxpayer paid PAYE and NICs in respect of temporary staff they supplied to end-clients ([5(2)]). This did not preclude a finding that the taxpayer was making a VAT-able supply of staff: see also Moher, at [10]. Whether, for VAT purposes, the supply constitutes a simple supply of staff, or a supply of some other service, or a composite supply, is also irrelevant to the application of the Agency Rules. The Agency Rules require merely that it be shown that either the ‘agency’ or the client exercise SDC over the individual. It does not matter whether that SDC is exercised by one, the other or both.[68]At the conclusion of the hearing, we reserved our decision, which we now give with reasons. We have considered any key points of disagreement in reaching our conclusions later.

Findings of fact

[69]The “Background Facts” are not in issue between the parties, save that the parties differ in view as to the conclusions that we should reach as a result. We, therefore, adopt the Background Facts, at [9] to [33] above, as our “Findings of Fact”, and do not repeat these here. We derived considerable benefit from hearing the oral evidence in this appeal, and from considering the documents. Having heard the evidence, in summary, we find that the Agency legislation applies to the engagement of the dog-handlers in this appeal.[70]We give our reasons for so finding.

Discussion

[71]The Appellant appeals against a Determination, in the varied sum of £88,503.70, for the 2017-18 tax year. Regulation 80 provides that where it appears to HMRC that there may be tax payable by an employer, which has not been paid, HMRC may determine the amount of tax to the best of their judgment. The Determination is then treated as if it was an assessment for the purpose of identifying appeal rights. This formulation is comparable with the requirement in the VAT legislation (in the context of an assessment) that HMRC must assess liability “to the best of their judgment”.[72]The meaning of the phrase “to the best of their judgment” has been the subject of much adjudication and consideration. The starting point to the sphere of litigation that has arisen are the principles enunciated in Van Boeckel, where the classic test was laid down by Woolf J (as he then was), at p. 292, as follows:
“…What the words 'best of their judgment' envisage, in my view, is that the Commissioners will fairly consider all material placed before them and, on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due. As long as there is some material on which the Commissioners can reasonably act then they are not required to carry out investigations which may or may not result in further material being placed before them.”
[73]He added this, at p 296:
“If they do make investigations then they have got to take into account material disclosed by those investigations.”
[74]As set out in Van Boeckel, there are various underlying principles which must be observed in order for HMRC to arrive at a best judgment assessment. The Commissioners are required to consider all material placed before them and come to a decision which is ‘reasonable’. The threshold for making a best judgment assessment is, therefore, a low one. The correct test is whether there has been an “honest and genuine attempt” to make a reasoned assessment: Pegasus Birds (2), at [22] (per Carnwath LJ). This does not translate to meaning that whether an assessment could be said to be “wholly unreasonable” is irrelevant to determining that question: see Pegasus Birds (2), at [77] (per Chadwick LJ). HMRC only need to consider the information before them in a fair way, and come to a decision which is reasonable (and not arbitrary) as to the amount of tax due.[75]Where the taxpayer seeks to challenge the assessment as a whole on ‘best of their judgment’ grounds, it is essential that the grounds are clearly and fully stated before the hearing begins. We are satisfied, having considered the Notice of Appeal and the Grounds of Appeal, that the Appellant did not seek to challenge whether the Determination was made to best judgment. The Appellant further did not seek to vary its Grounds of Appeal prior to the date of the hearing, despite being invited to do so.[76]We find that HMRC satisfied the obligation in reg. 80(2) to determine the amount of tax due to the best of their judgment. We further find that it was clear from the educational due diligence meeting in 2020 that HMRC had considered that the Agency legislation applied; which was some time before the Determination was issued in 2022 (following various exchanges of correspondence between the parties).

Whether the Agency legislation applies

[77]The Agency Rules that were, until 2014, found at ss 44 to 47 ITEPA re-classified most agency workers as if they were employees so that PAYE had to be operated on their pay. They came into the employed income net by virtue of these sections, and into PAYE by virtue of reg. 10 of the PAYE Regulations. The law was changed (as a result of loopholes being applied) by the Finance Act 2014 (“FA 2014”) so that there was no longer a requirement for personal service for the Agency legislation to apply. The changes mean that if there is more than one UK agency in the chain, it is the UK agency which contracts directly with the client that is deemed to hold an employment with the workers, and is responsible for operating PAYE/NI. The new Agency legislation is found in the same numbered sections (i.e., ss 44 to 47 ITEPA supra).[78]Section 44 ITEPA applies if “three conditions” set out under s 44(1) obtain:(1) The first condition, under s 44(1)(a), is that an individual (“the worker”) actually provides services personally to another person (“the client/end-client”) (“Condition 1”);(2) The second condition, under s 44(1)(b), is that there is a contract between a client and the agency (the Appellant in this appeal) (which makes the Appellant “the agency” for s 44 purposes) (“Condition 2”);(3) The third condition, under s 44(1)(c), is that under, or in consequence of, the end-client contract, (i) the services are provided, or (ii) the end-client provides consideration, for the services (“Condition 3”).[79]If s 44 applies, then the consequences as provided by s 44(3) follow so that:(1) the worker is to be treated, for income tax purposes, as holding an employment with the agency (i.e., the Appellant), the duties of which consist of the services the worker provides to the end-client; and(2) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated, for income tax purposes, as earnings from an employment with the agency (the Appellant), subject to ss 44(5) & 44(6).[80]“Excluded services” comprise services as an actor, singer, musician or other entertainer; or as a fashion, photographic, or artist’s model; and the services are provided through a third-person.[81]The worker must also be subject to “SDC” as to the manner in which the services are provided. The burden of proof is on the Appellant to disprove this. Even if all three conditions under s 44(1) are met, the application of s 44 is negated if “it is shown that the manner in which the worker provides the services is not subject to (or to the right of) SDC by any person”: s 44(2)(a). The SDC test is concerned with how the work is done, not what is done. However, a direction means a definite instruction.[82]Where Chapter 7 Part 2 applies, then the services rendered by the worker are, for income tax purposes, treated as if they were duties of an employment held by the worker. Accordingly, all employment income rules apply and PAYE should be operated by the payer. The Agency legislation does not apply where there is an employed relationship, either with the client or with the agency. A person is either an employee or an agency worker. This distinction governs who pays PAYE (in that if the worker is an employee of the client then the client is responsible for PAYE). It also has a bearing on whether a company is a managed service company, or an IR35 company.[83]It is pertinent to note that during the appeal hearing, Mr Young referred to the old version of the legislation. Indeed, Mr Young referred to Talentcore in his closing submissions; in particular, to the concept of an agency contract and the need to provide services. Talentcore however deals with the old legislation, which has been changed to remove the suggestion of an obligation to provide personal service.The 2014 change was explained in the consultation document, “Onshore Employment Intermediaries: False Self-Employment”, dated 10 December 2013, as being to tackle arrangements which exploited weaknesses in the existing legislation. Paragraph 4.2 of the consultation document states that:
“The proposal is to strengthen existing legislation relating to employment agencies by removing the obligation for personal service. Instead the legislation will focus on whether the worker is subject to, or the right of, supervision, direction or control as to the manner in which the duties are carried out.”
[84]Both parties in the appeal before us are in agreement that:(1) There was a contract between the Appellant and the end-clients (s 44(1)(b) (i.e., Condition 2).(2) If we conclude that the dog-handler personally provided services, those services were provided under the contract between the Appellant and the end-client; and the end-client paid consideration under, or in consequence of, that contract (s 44(1)(c)) (i.e., Condition 3).(3) The services were not “excluded services” within s 47.(4) Remuneration was receivable by the dog-handlers and did not constitute employment income of the dog-handlers, apart from Chapter 7 (s 44(2)(b)).[85]These matters are not, therefore, in issue between the parties.[86]In respect of s 44(1)(b), there needs to be a contract between the client and a person other than the worker; the client or a person connected with the client. In the circumstances of this appeal, we are satisfied that there was a contract between each of the Appellant’s end-clients and the Appellant. In the educational due diligence meeting, Mr Stone confirmed that the Appellant provided the services of the dog-handlers to the venues. The venues would then pay the Appellant for the services and then the Appellant would, in turn, pay the dog-handlers for such services. This is evidenced in the invoicing whereby the Appellant sends the invoices to its clients for the services provided. Neither Mr O’Ryan, nor Mr Thornborrow, had seen the contracts between the Appellant and its end-clients. They did not, however, deny their existence.[87]The Appellant’s ‘client list’, which we have had the benefit of seeing, listed 36 clients. In examination-in-chief, Mr Stone stated that the Appellant had approximately ten clients. When taken to the list, he explained that that was the list of all of the Appellant’s clients, at one point or another. He could not, however, say how many clients the Appellant had during the relevant period. Materially, the dog-handlers did not contract directly with the end-clients. The dog-handlers invoiced the Appellant based on the number of hours that they worked, billed at a set-rate which could go up for night work and during public holidays. The contracts, along with the terms and conditions between the Appellant and its end-clients, clearly show that the condition in s 44(1)(b) is satisfied.[88]Section 44(1)(c) provides that “under or in consequence of that contract –(i) the services are provided, or(ii) the client “pays, or otherwise provides consideration, for the services”. Only one of these conditions require to be satisfied. Mr Stone provided HMRC with three contracts between the Appellant and its end-clients. Contrary to Mr Young’s submission that HMRC “cherry-picked” the contracts, the contracts were exhibited to Mr Stone’s own witness statement. Under those contracts, the Appellant agreed to provide search-dog operatives, and their dogs. We have set out an example of such a contract in the “Background Facts” above. In return, the fee paid to the Appellant was calculated based on the number of search dog operatives and dogs provided (as well as the number of hours that they worked).In this appeal, the services are provided because the contract between the Appellant and each of the clients requires the Appellant to provide dog-handlers, with their dogs, to work on the client’s site. Under that contract (or in consequence of the contract), the client pays the Appellant for the work which is performed by the dog-handler. The dog-handlers then invoiced the Appellant, and they were paid. Consequently, therefore, the condition in s 44(1)(c) is satisfied.[89]We now turn to the condition at s 44(1)(a), which is the only live issue.

Condition 1: s 44(1)(a)

[90]Mr Young opened the Appellant’s case by saying that the issue for determination is, fundamentally, about the nature of the supply being made; whether it is a supply of labour or something else. In further amplification of this submission, he asserted that there is not a ‘supply of labour’. We reject this submission and agree with Mr Stone’s submission that this is not the statutory question that we must determine. This is because this appeal does not concern VAT. The issues of statutory interpretation and the application of statute that arise in this appeal do not call for a proper categorisation, for VAT purposes, of any supply in this appeal; whether that be a supply by the dog-handlers to the Appellant, or by the Appellant to its end-clients. What we require to do in determining this appeal is to focus on the statutory language in s 44, and the conditions included therein.[91]Mr Young further referred to case law relating to employment status. We find that his reliance on such case law is based on false premises. This is because the test for employment status is not relevant in the context of this appeal. That is fundamentally because there is an exemption in s 44(2)(b) ITEPA (if money is a subject of PAYE then Chapter 7 does not apply). Consequently, there will never be a situation where a person is both an employee and caught by the Agency legislation. Therefore, the case law that relates to employment status that has been referred to by Mr Young does not assist us in the circumstances of this appeal. It is common ground that none of the dog-handlers were employees of the Appellant. There is, however, an overlap between the Agency legislation and the test for employment (to the extent that one is looking at control). Furthermore, there is mutuality in the agreements whenever the work is being performed. In this respect, we have considered the test for mutuality set out in PGMOL, which was referred to and relied upon by Mr Stone. We will return to consider PGMOL later.[92]In order to determine the live issue in this appeal, it is necessary to look at the words used in the legislation, and what it requires. The task is simply to interpret the legislation and apply it to the case at hand.

An individual (‘the worker’)

[93]Mr Young submits that there are no workers in this appeal because there is a “supply of services”. Mr Young further submits that the services provided by the Appellant were in the nature of dog detection services, and that these services were not personally provided by the dog-handlers. In further amplification of this submission, he once again asserts that this is because the dog-handler is not an ‘individual’, or a ‘worker’. He adds that the subcontractor (the dog-handler) is making a composite supply of dog detection services to the Appellant, which goes beyond the supply of an individual worker and should not be categorised as personally provided service. We are not in agreement with these submissions. This is because what the legislation requires is an ‘individual’ (i.e., a human being). Breaking down the wording of the legislative provision, s 44(1)(a) refers to “an individual (‘the worker’)”. Mr O’Ryan and Mr Thornborrow, together with the list of those included in the Determination, are individuals who were engaged by the Appellant.[94]Furthermore, although the Fulham and Chelsea contracts referred - in the recital and description of the services that the Appellant would supply - to the provision of search dog operatives, we are satisfied that both parties would have known, and understood, that the search dog operative would come with a dog.[95]The next point to consider is that relating to “personally provides services…to another person (‘the client’)”. Mr Young appears to suggest that, for the purposes of s 44(1)(a), the ‘services’ in question are provided not by the dog-handlers, but by the dogs themselves. We are satisfied that this analysis is incorrect. We find that there is force in Mr Stone’s submission that the dog detection services provided by the Appellant depended, entirely, on the dog-handler’s work. Without the dog-handler’s presence, it would be impossible to realise effective search detection services.[96]The word ‘service’ or ‘services’ is an ordinary English word and takes its meaning from the legislative context. The context here is the Agency legislation, and the language used by Parliament seeks to capture those circumstances in which work is being done by an individual for someone else. The individual is personally providing something of utility to the client. We are in agreement with Mr Stone’s submission that s 44(1)(a) does not require an obligation - whether contractual or otherwise - on the worker’s part to provide services personally.[97]In the Fulham contract, the sub-clauses that the Appellant had warranted, and undertaken, at Clause 7.1 were as follows: “7) OBLIGATIONS 7.1 The Service Provider represents, warrants and undertakes to Fulham as material terms of this Agreement that:(a) it is a properly constituted company registered under the laws of England and Wales;(b) it has all necessary capacity, power and authority to enter into this Agreement and comply with its obligations hereunder and this Agreement is executed by a duly authorised signatory legally able to bind the Service Provider;(c) it has disclosed to Fulham all such material facts, matters and/or things as would reasonably be likely to affect the proper performance of the Services by the Service Provider and/or the willingness of Fulham to enter into this Agreement;(d) it is a company specialising in the provision of the Services and it and any Personnel have and will continue to have at all times during the Term, all the necessary qualifications, experience and capability required in order to deliver the Services to the highest industry standards;(e) it will comply in all respects with Fulham's written directions from time- to-time in relation to the Stadium, the Training Ground and/or the performance of the Services;(f) it will not, without Fulham’s express written consent, use the Brand or any intellectual property owned by Fulham (including but not limited to any brand names, trading names, logos or internet domain names, whether registered or unregistered) or hold itself out as having any association with Fulham or any of its players or seek to exploit the intellectual property owned by any other business owned by or associated with the Chairman, including but not limited to the Jacksonville Jaguars LLC or Flex-N-Gate LLC;(g) it will not, without Fulham’s express written consent, permit to be displayed at the Locations (including on any objects or structures at or brought onto the Venue) any branding, logo, signage or intellectual property of any nature which is owned by or associated with the Service Provider;(h) it and those persons or Personnel by whom the Services are provided shall possess and/or exercise such technical skill and care as may be required in order to carry out the proper performance of the Services to the highest industry standards and shall comply in all respects with all labour, employment, health, sanitation, safety and/or any other applicable laws, regulations, orders, directions or codes of practice in force from time to time and which are applicable to the Services, such compliance to be at the sole cost of the Service Provider;(i) it shall ensure that all Search Dog Operatives comply in full with the provisions of this Agreement as if they were a party to this Agreement and the Service Provider shall be liable to Fulham for the acts and omissions of any Stewarding Personnel in their performance of the Services or in undertaking of any other activity in relation to this Agreement;(j) it shall ensure (and shall be responsible for any costs associated with ensuring) that all Search Dog Operatives: (i) are legally entitled to work within the UK; (ii) wear suitable apparel, footwear and/or clothing in performing the Services; (iii) understand and comply with Fulham’s Health and Safety requirements; and (iv) have and display at all times when providing the Services, proper identification;(k) it shall ensure that any Service Equipment is used and operated safely and only by Search Dog Operatives who are properly trained to use such equipment;(l) it shall ensure that the Service Equipment is fully tested to the highest industry standards, of appropriate quality, fit for purpose and CE marked;(m) it shall not (and shall procure that the Search Dog Operatives shall not) undertake any act or omission or do, say or permit to be done or said anything which brings into disrepute, defames or is otherwise damaging to the image or reputation of Fulham, any of its employees, officers, directors or contractual partners, the Chairman, or any of the businesses owned by or associated with him, including but not limited to the Jacksonville Jaguars LLC or Flex-N-Gate LLC;(n) it has and will continue to hold (and shall procure that all Search Dog Operatives hold) at all times, any such licenses, consents, approvals or other permissions as may be required in order to carry out the Services;(o) it shall ensure that the Search Dog Operatives shall comply in all material respects with all applicable statutes, regulations, codes of conduct (whether produced by any relevant authority, Fulham or otherwise) collective agreements, terms and conditions of engagement, orders and awards applicable to their conditions of engagement, in their performance of the Services;(p) it shall be solely responsible for the Search Dog Operatives (including any agents or sub-contractors) in their performance of the Services and shall be liable to Fulham in respect of any failure by any of the Stewarding Personnel to perform the Services adequately and/or comply in full with the terms of this Agreement; and(q) all Search Dog Operatives shall be employed or engaged (and remain employed or engaged) by the Service Provider and not by Fulham and the Service Provider will be fully responsible for paying all salaries, wages, commissions, bonuses, national insurance contributions, P.A.Y.E., pensions, sick pay and all other amounts payable directly or indirectly to the Search Dog Operatives.” (j) it shall ensure (and shall be responsible for any costs associated with ensuring) that all Search Dog Operatives: (i) are legally entitled to work within the UK; (ii) wear suitable apparel, footwear and/or clothing in performing the Services; (iii) understand and comply with Fulham’s Health and Safety requirements; and (iv) have and display at all times when providing the Services, proper identification;[98]These sub-clauses placed various obligations on the Appellant to ensure something, or procure something, that only the worker can actually do. The fact of the matter is that in respect of every engagement for which the Appellant was paid, a dog-handler did “personally provide services” to the end-client, along with the dog. This is because it is the handler who possessed the specialist skills, training and expertise required to effectively deploy and direct the search dogs. The dog could not, itself, decide where, how or what to search, or indeed respond to the end-client’s orders without the dog-handler.[99]We have already determined that the dog-handler was required to have attained NASDU Level 3 qualifications for Passive/Proactive Drug Detection Dogs and/or NASDU Level 4 qualification for Explosive Detection Dogs. In addition, they needed to have a valid NASDU Level 3 or 4 Certificates for each detection dog that is deployed. The certificate is for a “handler and search dog” team. Furthermore, NASDU and the NACSP both provided training and accreditation to the handlers and their dogs. Furthermore, the individual dog handler was required to be licensed by the SIA.[100]Whilst not binding on us, though highly persuasive, we have considered the decision of the FtT in K5K, which dealt with the change in legislation from 2014. In K5K, the substantive issue for determination was whether s 44 applied to payments made by K5K to agency workers who had a personal company, and are referred to by K5K as Limited Company Contractors (“LCCs”). One of the arguments advanced in K5K was that because people were working through Personal Service Companies (‘PSC’), the legislation did not apply. At [185], the FtT K5K said this:
“185. It is common ground that two of the three conditions provided under s 44(1) are met. (1) Section 44(1)(b) is met by virtue of the contract between the appellant and the End Client, whereby the appellant is the agency for the purposes of s 44 ITEPA. For completeness, this condition is satisfied whether the relevant contract between the appellant and an End Client is the Hirer Terms (as submitted by the appellant) or some other contract, written or oral. (2) Section 44(1)(c) is satisfied under or in consequence of the End Client Contract, whereby: (i) the services of the Worker are provided, and/or (ii) the End Client pays or otherwise provides consideration for the services. For completeness, this condition is satisfied whether the relevant contract between the appellant and the End Client is the Hirer Terms or some other contract, written or oral. For the avoidance of doubt, whilst the appellant appears to dispute that it is the Worker who provides the services, we understand that it is not disputed that the End Client pays consideration for the services in consequence of the End Client Contract.”
[101]In this respect, we find that there is considerable force in Mr Stone’s submission that the Appellant is incorrectly focussing on the service that it provides to its end-clients, rather than the statutory question of whether the relevant individual has personally provided services to the client; irrespective of whether a form of equipment was also provided at the same time.[102]At [191], the FtT commented:
“191.We find the analysis of the contractual relationships upon which the appellant’s argument is founded to be very unclear, for the reason that the term ‘body corporate’ seems to be used interchangeably to refer to either a Hirer or a Personal Company (of an LCC).”
[103]At [192], the FtT says this:
“192. Whatever the appellant’s position on the alleged contract between any Personal Company and an End Client, ultimately the appellant argues that the Workers did not personally provide services to any of the End Clients. As we understand it, the crux of the appellant’s argument is that (a) ‘services were provided by the company that contracted to provide them’, and (b) ‘None were/are provided by any such company’s servant or agent’. We address each limb of the argument by asking the following questions: (1) Was the Intermediary / Personal Company in the contractual chain? (2) Did an LCC Worker personally provide services to any of the End Clients?”
[104]At [193], the FtT rejected the point about the PSC being a contractual chain, as follows:
“Was the Intermediary / Personal Company in the contractual chain? 193. We address the first limb of the appellant’s argument by asking the question whether the Personal Companies (of the relevant workers) were a party in the contractual chain to supply the relevant workers to the End Clients. We find as a matter of fact that during the Relevant Period, the contractual arrangements in place meant that the Personal Companies in question were never a party in the contractual chain. (1) The template Worker Contract was the only contract in place for the appellant to contract with an Agency Worker. (2) It was the same Worker Contract being used, whether the Worker was an individual or an LCC; no separate or additional terms existed whereby the appellant contracted with the Personal Company of an LCC. (3) The appellant contracted with an End Client in accordance with the two versions of Hirer Terms of Business in use during the Relevant Period; one version for the supply of workers as individuals, and one for workers supplied as LCCs. (4) The End Clients did not contract with any of the Workers, whether in their capacity as individuals or as LCCs. The End Clients contracted only with the appellant. (5) The Company Documents (and in particular, the Confirmation Documents) were not contemporaneous with the Template Worker Contracts during the Relevant Period to alter the fact that no contract existed between K5K and the Personal Companies.”
[105]At [197], the FtT said this: “Did LCC Worker personally provide services to any of the End Clients? 197. In support of the second limb of the appellant’s argument that s 44(1)(a) is not satisfied on the facts, Mr Jones submits that:(1) It is significant within ITEPA a different word ‘provide’ is used for s 44(1)(a) from that of ‘perform’ under s 49(1)(a), which states: ‘an individual (“a worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),’(2) Where the statutory wording uses ‘provide’ instead of ‘perform’, Mr Jones submits it is as clear as a bell that ‘provide’ is concerned with the contractual arrangements, while ‘perform’ is concerned with a matter of fact as to who actually does the work.(3) The ultimate question under s 44(1)(a) is therefore: ‘Who is contractually obliged to provide the service?’(4) The answer must be construed with reference to the definition of ‘Agency Worker’ within the Hirer Contract, which means ‘any officer, employee or representative of the Intermediary supplied to provide the Intermediary Services’. It is the Intermediary which is obliged to provide the Intermediary Services, and can fulfil its obligation by providing ‘a representative’.(5) A relevant worker is not contractually required to be the individual who personally provides services to the End Client; hence the condition under s 44(1)(a) is not met.” ‘an individual (“a worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),’[106]HMRC’s submission in K5K was at [198]:
“198. In response, Mr Tolley make the following submissions: (1) As a matter of statutory construction, s 49 should not be taken in isolation, and it is apt to consider the statutory purpose of a particular section. (2) On a proper interpretation, the words ‘personally provides services’ in subsection 44(1)(a) do not refer to the contract to provide services (unlike subsections (b) and (c)). Rather they refer to the reality of the individual person who actually provides the services: here, the nurse or health care assistant, and in other cases, it might be an IT worker or project manager. (3) Section 44 is intended to cover situations where an agency supplies individual workers to clients, and so it would be illogical for s 44 to require a contract between the worker and the end client. (4) Following the construction of s 44, the party contractually engaged to provide the services is the ‘worker’ for s 44(1)(a) purposes. If the Personal Company is the contractual party, then HMRC accept that the appeal succeeds. (5) Whilst it is not uncommon for an intermediary to sub-contract, the appellant’s proposition that a ‘corporate representative’ can be sent is unrealistic, where the work can only be performed by an individual suitably qualified; the proposition is ‘devoid of commercial reality’ in the care sector environment which is so heavily regulated.”
[107]The FtT’s decision is at [199] to [200], as follows: “199. As a matter of statutory construction, we agree with Mr Tolley’s submissions on the statutory wording of ‘personally provides services’ under subsection 44(1)(a) for the reasons:(1) Section 44(1)(a) does not refer to any obligation (whether contractual or otherwise) on the worker to provide services personally. Rather, it refers simply to the facts: ‘an individual ... personally provides services ...’.(2) The interpretation of the current version of s 44(1)(a) as simply referring to a matter of fact of ‘an individual personally provides services’ is supported by the removal of any reference to ‘an obligation’ when compared to the superseded version of s 44(1)(a) in force between 6 April 2003 and 5 April 2014, which reads: ‘(a) 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”),’ [underlined wording removed](3) Section 44(1)(b) expressly envisages the services being provided under a contact between the end client (or connected person) and ‘a person other than the worker’.(4) Section 44(1)(b) makes no sense if there were any direct contract for the provision of the services between the Personal Companies and the End Clients under s 44(1)(a) (as contended by the appellant in reading into the words ‘personally provides services’ as pertaining to a contractual obligation.(5) If there were a contractual obligation being referred to under s 44(1)(a) as a matter of law, or a contractual arrangement in place between the worker and the end client as a matter of fact, then on these disputed premises, the appellant has not provided any sensible answers as to: (a) What was the point of the appellant’s involvement in the arrangements? (b) Why were the End Clients making payment to the appellant in respect of the provision of the services? 200. We reject the submissions in relation to the assertion that ‘no individual personally provided any services to any of the hirers’ as a matter of statutory construction.” ‘(a) 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”),’ [underlined wording removed] (a) What was the point of the appellant’s involvement in the arrangements? (b) Why were the End Clients making payment to the appellant in respect of the provision of the services?[108]The FtT in K5K observed that the legislation was amended in 2014 to remove the words “or is under an obligation personally to provide”. That change reinforced the point that the current legislation does not contain any obligation to provide services and focusses instead on whether they are provided.[109]Consequently, therefore, in respect of Mr Thornborrow’s work on the Tideway site as a dog-handler, we are satisfied that he is personally providing services in the sense that he is present on site; whether those services are as a dog-handler or dog-detection services. We are satisfied that the label does not matter. For example, in respect of whether Mr Thornborrow is providing those services to another person, the answer is ‘yes’ (Tideway). We find that it does not matter that he is not able to provide those services without a vital piece of equipment that he owns (i.e., the dog). There is no test of “if you are using a piece of equipment, is the equipment incidental to the service or not?” The positive question posed by the legislation is whether Mr Thornborrow personally provides services. This is simply a question of fact, e.g., “Is Mr Thornborrow personally providing services?” This is supported by the removal of any reference to the ‘obligation’ when compared to the superseded version of s 44(1)(a) in force between 6 April 2003 and 5 April 2014.[110]In order to realise an effective search, it is not enough to deploy the dog alone. This is because the dog’s reactions and findings must be interpreted and communicated. This is an essential part of the detection service, which can only be done by the dog-handler. The dog-handler’s personal judgment, and analysis, are critical to determining whether a genuine threat has been detected. The search dogs are treated like any other piece of specialist security equipment operated by trained personnel. As rightly submitted by Mr Stone, in the context of capital allowances, working dogs are treated as plant on the basis that they are an apparatus with which the trade is carried on, with an expected life of two years or more.[111]We, therefore, hold that ‘Condition 1’ (i.e., s 44(1)(a)) is satisfied in this appeal. We now turn to ‘SDC’.

Supervision, Direction and Control

[112]Section 44(2) ITEPA provides that:
“(2) But this section does not apply if –– (a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or (b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter.” (a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or (b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter.”
[113]This subsection, therefore, takes someone outside of the charge to tax. Either the worker is, in fact, subject to SDC, or they are subject to the right of SDC.In relation to SDC, it is not necessary that all three are present.[114]“Supervision” refers to someone looking over the manner in which something is being done, and not controlling how it is done. The facts we will return to later show that supervision was present in the circumstances of this appeal. Mr Stone accepted, in his evidence, that the client, in conjunction with the security adviser, supervises the work of the handler. The legislation refers to supervision “by any person”. The legislation also refers to the “agency” and the “client”. The most obvious person is the client. It will frequently be the case in such relationships that control is split between the agency and the client. The legislation cannot be avoided by simply splitting up control between different people. Mr Young, in his closing note, accepts elements of SDC by the client. In this respect, he refers to the client controlling the uniform and the client controlling the tasks that are going to be performed. It is clear from the evidence in the appeal before us that the client’s security manager has discussions with the security adviser (if there is one), or the search adviser. There is also an element of control over the task by the end-client(s) in this appeal. We are satisfied that that is “control by any person”.[115]“Control” does not have to be absolute, and it does not have to be control over everything. In illustration of this point, an example concerning a locum doctor was given during the hearing. Mr Stone submitted that the doctor would obviously have their professional training and their regulatory obligations beyond those owed to the Trust that has engaged their services. He added that no-one would seek to interfere with the precise diagnostic, or medical, decisions that the doctor makes (e.g., stepping up to tell a doctor or a surgeon how to perform a medical procedure). He further added that this does not prevent there being sufficient control.[116]Returning to PGMOL, the appeal considered the employment status of part-time football referees in order to determine the way match fees paid to them should be treated for income tax and NI purposes. PGMOL provided referees and other match officials for the most significant football competitions. The underlying question in the appeal was whether these individual contracts were contracts of employment. Before the tribunals and the Court of Appeal, the key issues were whether two key elements for the establishment of an employment contract were present:(i) the mutual obligations of the employee (to provide personal service) and the employer (to pay for those services) and(ii) a sufficient degree of control by the employer over the employee. The Supreme Court unanimously dismissed PGMOL’s appeal, holding that the minimum requirements of mutuality of obligation and control necessary for a contract of employment between the National Group referees and PGMOL were satisfied in relation to the individual contracts. What was said by the Supreme Courtwas that there must be some element of control, otherwise it cannot be an employment relationship. But it could be control over ancillary matters if it is the type of industry, or profession, where you cannot affect day-to-day control.[117]At [61] and [62], the Supreme Court said this, in respect of ‘control’:
“Control 61. There can be no doubt that a sufficient element of control by the employer over the employee is essential to the existence of a contract of employment, but it is a test that can prove difficult to apply. In most situations, of course, there is no difficulty. The degree of control over the work to be undertaken by the employee, where and when it is to be undertaken and, in many cases, the way the work is to be done leaves no room for doubt that the level of control is consistent with employment. But, in a minority of cases, where the nature of the services provided by the putative employee leaves little room for intervention by the putative employer, the question of control may be difficult to answer. 62. This was recognised by MacKenna J in RMC. In his summary of the three conditions for the existence of an employment contract, he expressed the requirement of control in these terms: “[The employee] 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 [the employer]”
(emphasis added) (p 515D). The emphasised words, which are echoed in later authorities, allow for a wide range of circumstances and leave the question of control to be answered by an assessment of the facts of each case. In Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318, [2001] ICR 819 (“Montgomery”) at para 19, Buckley J (with whom Brooke and Longmore LJJ agreed) referred to “some sufficient framework” of control.”[118]By reference to a passage in Montgomery v Johnson Underwood Ltd [2001] EWCA Civ318, Lord Richards said this, at [67]:
“67. The reference in the passage from Montgomery contains reference to those in occupations where, by the nature of the work, a putative employer can have little or no control over the execution of the work. Buckley J gave the examples of masters of vessels, surgeons, research scientists and technology experts. Zuijs concerned an acrobat working for an itinerant circus and it was in that context that the majority made the statement quoted by MacKenna J in RMC. The principal judgment was given by Dixon CJ and three other members of the Court. It is worth quoting the entirety of the relevant part of that judgment (at p 571): “The duties to be performed may depend so much on special skill or knowledge or they may be so clearly identified or the necessity of the employee acting on his own responsibility may be so evident, that little room for direction or command in detail may exist. But that is not the point. What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters. Even if Mr Phillip Wirth could not interfere in the actual technique of the acrobatics and in the character of the act, no reason appears why the appellant should not be subject to his directions in all other respects.” “The duties to be performed may depend so much on special skill or knowledge or they may be so clearly identified or the necessity of the employee acting on his own responsibility may be so evident, that little room for direction or command in detail may exist. But that is not the point. What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters. Even if Mr Phillip Wirth could not interfere in the actual technique of the acrobatics and in the character of the act, no reason appears why the appellant should not be subject to his directions in all other respects.”
[119]At [68] and [69], Lord Richards said this:
“68. This passage makes clear that, on the one hand, the requirement for control extends only so far as there is scope for it and, on the other hand, that there must be some control, if only in incidental or collateral matters. 69. As will be seen, the FTT in the present case laid stress on the inability, as a matter of law as well as practice, of PGMOL intervening in the performance by referees of their duties while officiating during matches. This is to misunderstand the degree of control which is necessary as a pre-condition to a finding of employment. As the authorities show, it is not necessary that an employer should have a contractual right to intervene in every aspect of the performance by an employee of his or her duties. In the case of football referees, the FA rules put them in a position of institutional independence while officiating at a match. This is as true of the Select Group as it is of the National Group, but it is common ground, and obviously correct, that members of the Select Group are employees of PGMOL.”
[120]This was the finding that PGMOL could not pull a referee off pitch mid-match. It is not, therefore, necessary that an employer should have a contractual right to intervene in every aspect of the performance by an employee of his or her duties.[121]At [70], Lord Richards said this:
“70. Equally, there are many occupations in which the employer would not have the practical ability, nor probably the legal right, to intervene during the performance of at least some duties so as to direct the manner in which they were performed. It is hard to see that hospital managers would be entitled to intervene in the performance of an operation which was being carried out in a competent manner or that the managers of an opera house could intervene in the conductor’s performance to direct him or her to increase or reduce the tempo. That is not to say that there would not be circumstances in which intervention would be both permissible and practical, such as where the duties were being performed in a way which was by relevant standards unacceptable. That would be equally true in the case of an independent contractor. Dixon CJ was right to say in Zuijs at pp 571-572: “There are countless examples of highly specialised functions in modern life that must as a matter of practical necessity and sometimes even as a matter of law be performed on the responsibility of persons who possess particular knowledge and skill and who are accordingly qualified.”
[122]Continuing at [72], he said this:
“72. While I entirely agree with the well-established proposition that control must be based on the terms of the contract in question, it does not follow that an employer must have a contractual right to intervene in every aspect of the performance by the employee of his or her duties.”
[123]In Ready Mixed Concrete, McKenna J said this, at p 515F (in respect of control):
“Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted. ‘What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters.’— Zuijs v Wirth Brothers Proprietary, Ltd (1955) 93 CLR 561, 571.” ‘What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters.’— Zuijs v Wirth Brothers Proprietary, Ltd (1955) 93 CLR 561, 571.”
[124]The case of Zuijs v Wirth Brothers Proprietary, Ltd (1955) 93 CLR 561 concerned an acrobat working for an itinerant circus. It was in that context that the majority in PGMOL made the statement quoted by McKenna J in Ready Mixed Concrete.[125]It is clear from the authorities that there are those industries in which you cannot, practically, intervene. There is, however, no need for a contractual right to intervene in all aspects of the performance. Provided that there is some element of control, it may be over incidental, or ancillary matters. In the circumstances of the appeal before us, it is not open to the Appellant to say that because there is not control over everything, there is no control. It further is of no real consequence that the client cannot intervene in the manner in which the work is being done, at the time that it is being done. It further does not matter that the worker is regulated and highly experienced. For instance, one would not interfere with the professional judgment of a doctor. There are, however, ancillary matters such as a GP going to a surgery as a locum where the surgery may control the list of the patients that the GP will see, the order in which they will see patients, and whether the GP does home visits. Those elements of control are not actually over the doctor’s clinical judgment whilst in clinic.[126]The Appellant in the appeal before us does not interfere in the performance of the dog-handler’s duties during the searches. It is, however, clear from the evidence before us that if the dog-handlers failed to follow the Appellant’s standard operating procedures, failed to follow a protocol given by the client, or failed to do the searches that they were told to, this would be picked up by the Appellant later.[127]The dog-handlers personally attended the end-client’s venues. We have considered the fact that the dog-handlers were sent a ‘job sheet’ by the Appellant. Mr Stone explained that he selected which handlers to send the job sheets to. This was consistent with his discretion as to the allocation of tasks recorded in the contract with Mr Goode. The job sheet informed the handlers that work was available for a particular client. The job sheet also set out the type or work required. As Mr O’Ryan and Mr Thornborrow made clear, the handler’s presence was essential. During cross-examination, Mr Stone accepted that if the Appellant sent a job sheet to a handler, the handler had to personally do the job, unless they are unable to do it. He further accepted that the handler cannot send another person in their place because the identity of a particular dog-handler matters as they have to be licensed and regulated. They also have to be vetted by the Appellant in order for the Appellant’s insurance to cover them. Mr Stone further clarified that if a loss was caused by a dog-handler engaged through the Appellant, it was the Appellant’s insurance against which the claim would be made.[128]The standard terms and conditions in the contracts provide that:
“Supplier Personnel: the Supplier’s employees or agents who may be provided to perform the Services and who shall be under the direction, supervision and control of the Supplier.”
[129]This document was produced by the Appellant in advance of the educational due diligence meeting. It was not suggested in that meeting that it was inaccurate, or that it had never been used with clients. In evidence, Mr Stone suggested it had never been used with a client, but could not explain why it had nonetheless been provided to HMRC without making this clear.[130]The obligations in the Fulham contract required the Appellant to ensure that the search dog operatives complied with Health & Safety, complied with the directions of Fulham, or complied with industry best practice. The only way that the Appellant could warrant those things is if it has an element of control over the worker (i.e., dog-handler) to ensure that the worker is using industry best practice. Otherwise, to use the language used during the hearing, if they are “unleashed” on the client’s site with no sense of control, the Appellant is not contractually able to warrant that certain outcomes will take place. A further thing the agreement warrants is that the Appellant will be responsible for the operatives, and this can only happen with an element of control. In this respect, we are satisfied that the Appellant is taking the risk for what the dog-handlers do on the ground at the client’s site.[131]In respect of ‘dress codes’, we have considered the fact that some clients might request handlers to follow a specific dress code. For example, Tottenham Hotspur might request a Spurs tie, while the Appellant had its own branded jacket. By his own oral evidence, Mr Stone confirmed that he generally liked the handlers to have a ‘corporate’ appearance. He accepted that a failure to adhere to the dress code would reflect badly on the Appellant. Furthermore, Mr O’Ryan accepted that he would wear what he was told to wear, and that if he turned up wearing clothes which were out of keeping with the dress code, he would expect the client to tell him to get changed into something more appropriate. Mr Thornborrow accepted that the end-clients could set requirements as to the dress code that he was required to follow. Indeed, dress code formed a part of Wimbledon’s Key Performance indicators (“KPIs’). In relation to the Wimbledon dress code, Mr Stone explained that Wimbledon were:
“very intent on what the team should wear, even down to a harness for the dog…has to be a certain colour.”
[132]Mr Thornborrow accepted that he was required to follow the dress code. The general tenor of the evidence that we heard was that ensuring a proper dress code at Wimbledon was “absolutely” important for the Appellant.[133]We have further considered that some venues had ‘site inductions’, which were provided by the end-clients. For ‘Tideway, this lasted three days, and the dog-handler received a certificate at the end of that period. The handler was then tested on what they would do in particular situations during ‘scenarios’ that took place during the inductions. For Fulham, there was a briefing on ‘match day’, which was always with a ‘health and safety’ element. The background further shows that for handlers who were unfamiliar with the venue, a representative from Fulham would talk them through matters and explain how things were done at that particular venue. We have also considered the fact that Mr Stone might also attend the induction, which he accepted in his oral evidence.[134]A further incontrovertible fact in this appeal is that each venue had a ‘security manager’, whose contact details were provided on the job sheets. As considered earlier, the security manager was responsible for security on site and was responsible for liaising with the various handlers. The security manager liaised with the dog-handlers and with the staff who were responsible for body searches, and the stewards. The dog-handlers were in daily contact with the security manager. This was confirmed by Mr Thornborrow in relation to ‘Tideway’. The evidence before us also showed that sometimes dog-handlers attended from a variety of companies, and not just from the Appellant. This shows that the dog-handlers were part of a larger security operation which was run by the end-clients. In his oral evidence, Mr Thornborrow referred to his having “one contact person” in “a massive security team”. Mr Stone ultimately accepted that there was a hierarchical command structure at the venues. This involved the security manager, those working in the control room, and the rest of the end-client’s security apparatus. The security manager determined which searches would be done and information would be filtered down to dog-handlers through the security manager. If requirements changed on the day, that would be communicated by the security manager to the handlers.[135]Another undisputed fact is that the Appellant would provide a search adviser. Mr Thornborrow accepted during cross-examination that the decision as to how many dogs were needed, and how long searches would take, was made by the clients in conjunction with the search adviser. Moreover, Mr Stone accepted in evidence that the search adviser would issue directions to the handlers at the venue by giving them the ‘tasking sheets’, telling them what they needed to do. The dog handlers followed the directions of the end-client as to what kinds of searches to carry out and where to do them, providing those directions were safe and not unreasonable. Mr Stone also accepted that the handlers would be required to follow client protocols, insofar as they were safe and reasonable. For example, they were required to follow Wimbledon’s protocols upon making a find. It was the client’s prerogative to create assignment instructions for their venues, within reason. The dog-handlers were expected to follow these instructions. By his own oral evidence, Mr Stone regarded ‘instructions’ as synonymous with ‘orders’. The search advisers directed the individual handlers as to the tasks they specifically were to perform.[136]As regards Wimbledon, Mr Stone accepted that when the search adviser said to a particular handler that they had to go and do Centre Court, level 1 search, that handler “is required to do that”. Handlers did not have the discretion to do different tasks to those shown on the tasking sheet. As regards Tideway, when Mr Thornborrow arrived on the Tideway site, he physically reported to the security point and was told he would be doing vehicle searches. He did not know the task he was going to perform before arrival on site. He was given information such as what to do if he found something suspicious, and who to call. As regards Spurs, the handlers would go to the search adviser as soon as they arrived at the site. The search adviser then allocated the tasks that needed to be done to the handlers over the period of time required.[137]Similarly, the dog handlers followed the directions of the end-client as to the manner of the searches, again providing those directions were reasonable. Mr Thornborrow said that the reference to ‘Code Black’ on the job sheet referred to a particular kind of response to an unattended bag. He said:
“each venue has different ways of dealing with it, so you make yourself aware of that and you deal with it as they directed, as the venue want you to deal with it”
[138]In the case of Wimbledon, the documents recorded the concepts of ‘HOT’ and ‘Confirm, Clear, Cordon, Control, Check’, which were ultimately drawn from government guidelines. Mr Thornborrow accepted he was required to follow these guidelines. Mr Stone also accepted that the Appellant provided standard operating procedures that the handlers were required to follow. Clients might have their own protocol as to what to do in case of a suspect package. Mr O’Ryan did not suggest that he was free to disregard this. He also said that sometimes he might be directed to do a search in a manner he disagreed with, and explain his reasoning; but if it was insisted upon, he would carry out the search “in their manner”, and not his own. He would then write up a report of how the search was done, and have it signed.[139]Mr Stone accepted that the search manager (or the equivalent role in the client’s security set-up) was able to supervise and check that the searches were being done as they are meant to be done, in liaison with the search advisor. Upon making a find, but before starting a search, the handlers would have to call the site control room and inform them of the find. Mr Thornborrow was asked during cross-examination:
“So the search advisor can direct you?”
[140]He replied: “Yeah, the search advisor oversees us”.[141]At Wimbledon, the handlers were also required to inform the control room when some of the tasks were completed. If Mr O’Ryan had been asked to perform mobile searches but himself decided to do static searches instead, he would expect that to be picked up on by the clients, and to be told to do what he had been asked to do.[142]As regards dress code, we have considered that the client would be entitled to direct a handler who was not properly attired to change into suitable clothing. This was accepted by Mr Stone. The Appellant was required to comply with written directions from the clients, and was also required to ensure compliance by the handlers with applicable laws, regulations, orders, directions and codes of practice. Mr Stone accepted it was the Appellant’s responsibility to enforce codes of practice and see that the handlers followed directions. The Appellant was, generally, required to ensure the handlers complied with the terms of the contract. Clients supervised the dress code that had to be adhered to. The following exchange occurred in cross-examination of Mr O’Ryan:
“Q. [….] at Royal Ascot if everybody else turns up in suits and you turn up in shorts and a T shirt, [….] -- but you would expect that somebody would say to you that you are wearing the wrong clobber and you have to go and get changed? A. Yes, probably the client.”
[143]Mr O’Ryan was clear that if he did not conduct himself in a professional manner, this would reflect badly on Appellant. He further explained that the handlers would, upon arrival, sometimes be made to sign a document containing health and safety rules, rules regarding social media posts, and other similar rules. Wimbledon had site rules, which included health and safety requirements. Mr Thornborrow said he “definitely” had to comply with these. Mr Stone also accepted the handlers had to follow these rules. As to health and safety, Mr Thornborrow explained that PPE had to be worn as a health and safety requirement, and that if this was not done it would be picked up “straightaway” by the cameras at the venue.[144]Mr Stone accepted that the Appellant had a disciplinary procedure in place. If a handler committed misconduct on site, Mr Stone would investigate the matter to find out what happened. If the clients complained that searches were not being carried out in the agreed manner, Mr Stone would investigate in order to understand whether there was a reasonable explanation for what had occurred. He would “have to ask questions”. Where there had been a problem and things had not been done according to the necessary standards, remedial training might be offered, or Mr Stone might simply not use the handler again.[145]Whilst the end-client in this appeal does not perform dog detection services, the end-clients that we have heard about in this appeal do have a security operation. Wimbledon and Tideway operations involve a large, complex security team. What the dog-handlers are doing is fitting into that team so that the security team will have a number of different parts of the operation. In respect of Wimbledon, the picture that emerged is that there certainly is a hierarchical structured organisation, and that they are in a position to use the search dogs in a way that fits within their security operation. The fact that the venues do not, themselves, provide dog detection services is not relevant. Returning to the GP surgery example, a GP may bring in an agency doctor to supplement the provision of healthcare, but many organisations bring in individuals to do work which is ancillary to the business. A GP surgery may also bring in an IT contractor via an agency. That does not prevent the Agency legislation from applying.[146]Therefore, whilst nobody interfered with the searches in this appeal, the searches were decided and dictated to the dog-handlers. The dog-handlers were told the order in which the searches are to be done. It is clear that a person may be told that they are going to search a particular area but they move to another area because a dog was sick. This does not, however, detract from the fact that the client can, and does, dictate the type of search, the protocols that must be adhered to, and the dress code. We have considered the fact that the Appellant had its standard operating procedures, which had to be followed by the dog-handlers; and which are to do with the actual work that is being performed. There was also the wearing of PPE, in some circumstances. Despite such elements of control applying to all persons on site, those elements of control are still relevant. Despite the fact that the venues may not have been licenced or qualified to carry out dog searches, they were certainly able to supervise how the work was done. For instance, in relation to Wimbledon, the security manager has “feet on the ground” and observes how the searches are being performed. That is supervision.[147]Mr Stone told HMRC and the SIA that the contract between the Appellant and Mr Goode was used for all dog-handlers, However, during cross-examination, he stated that only two or three handlers had a written contract, but he could not specify how many handlers would have had a written contract in 2017. Mr Stone accepted that what he had said during that meeting was inaccurate and explained his position during his evidence thus:
“I said something that was inaccurate purely because I may have been a little bit annoyed with the SIA and HMRC for treating me the way they’ve treated me.”
[148]The absence of a written contract does not prevent there being the right to SDC. Ready Mixed Concrete is authority for the proposition that in a relationship of work, the right to control what, where, when and how the work is done will sometimes be express, in a contract; but if it is not express, it must be implied and that is because in this kind of work relationship, control over those things must lie somewhere. In Ready Mixed Concrete, at p 516A, the court said this:
“To find where the right resides one must look first to the express A terms of the contract, and if they deal fully with the matter one may look no further. If the contract does not expressly provide which party shall have the right, the question must be answered in the ordinary way by implication.”
[149]In the absence of an express right, it is implied by looking at all the circumstances. It is relevant - when looking at all the circumstances to infer were the right to control lies - to look at the contractual relationship that the Appellant has with its clients.[150]Lastly, Mr Young submitted that some of the dog-handlers are VAT registered, and that HMRC accept that they make a standard-rated supply of services. He added that this is inconsistent with the Determination that there is a supply of ‘labour’. Mr Stone accepted during his evidence that only one dog-handler was VAT registered for the relevant period (Mr Blackmore). He explained that Mr Blackmore was VAT registered because he runs, or ran, his own jobs and, therefore, it was more for his clients’ purposes. Mr Stone added that Mr Blackmore had only helped him “once in a blue moon”.There is, however, no evidence as to why he was VAT registered; or, in particular, that it was a requirement of his work for the Appellant. We are satisfied that the VAT treatment of the supplies is irrelevant to the application of the Agency legislation. Supplies of labour/staff are taxable supplies. VAT is not due in respect of employees, or deemed employees.[151]The fact that the ‘agency’ may be making a taxable supply for VAT purposes does not affect the application of the Agency legislation. In Adecco, the taxpayer paid PAYE and NICs in respect of temporary staff they supplied to end-clients. This did not preclude a finding that the taxpayer was making a VAT-able supply of staff. In Moher and Adecco, the question of whether the taxpayer was making a supply of staff or a supply of, respectively, medical services or introduction services, turned on whether it was the taxpayer or the end-client who exercised control over the individuals supplied.[152]We are satisfied that there is SDC in this appeal. The Agency legislation requires, merely, that it be shown that either the ‘agency’ or the ‘client’ exercise SDC over the individual. It does not matter whether that SDC is exercised by one, the other or both. As the dog-handlers are not engaged on an employed basis, the income is not otherwise chargeable as employment income before the Agency legislation applies. Applying the Agency legislation, the remuneration receivable by the dog-handlers is treated as earnings from employment with the Appellant and, therefore, the Appellant is responsible for accounting for the PAYE due.

Conclusions

[153]Having considered all of the documentary and oral evidence before us, cumulatively, we are satisfied that:(1) Section 44(1)(a) does not require an obligation (whether contractual or otherwise) on the worker’s part to provide services personally, but simply refers to whether the worker did personally provide services.(2) The dog detection services provided by the Appellant depended on the handler’s work. Without the handler’s presence, it would be impossible to realise effective search detection services. In respect of every engagement for which the Appellant was paid, a dog-handler did personally provide services to the end client, along with the dog.(3) For the purposes of s 44(1)(a), the search dogs are treated like any other piece of specialist security equipment operated by trained personnel[154]We are further satisfied that SDC in this appeal is evidenced by the fact that:(1) The contract between the Appellant and its clients provides the client and/or the Appellant with the right of SDC over the dog-handlers.(2) The contract between the Appellant and its clients refers to KPIs which the handlers need to achieve, site rules for the handlers to abide by, training to complete, and assignment instructions to follow.(3) The contract between the Appellant and the handlers refers to disciplinary procedures if the operatives do not perform the services to the standards required.(4) The contract provides Mr Stone with the right to allocate tasks to the dog-handlers, at his discretion.(5) The assignment instructions provide directions for the dog-handlers to follow, and explain how the services are to be provided. It also details the dress code for the dog-handlers to abide by.(6) The Appellant has standard operating procedures in place for the dog-handlers to follow, which detail how the services are to be provided and refer to a supervisor. There are also briefings provided by the clients to the dog-handlers.(7) The Appellant conducts a number of training sessions with the dog-handlers to ensure they provide services to a suitable standard.[155]Overall, we find that s 44(1)(a) is satisfied. We, therefore, uphold the Determination and exercise our statutory powers to vary the Determination to £88,503.70 (as varied by the review).[156]Accordingly, therefore, the appeal is dismissed.

Right to apply for permission to appeal

[157]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. Release date: 16th OCTOBER 2025