Accenture Services Ltd v HM Revenue and Customs & Ors

An extra-statutory VAT concession operates according to its published terms and context. A claimant must fall clearly within those terms to establish an enforceable substantive legitimate expectation. The court interprets the concession, but reviews HMRC’s evaluative application of it on rationality grounds, having regard to the material available when the decision was made. Where managerial control is divided, “the control” or “the direction” ordinarily means predominant practical control or direction. The court must assess the overall commercial arrangement rather than isolated contractual provisions. A parent’s indirect control exercised through the employing subsidiary may remain control by the subsidiary. A supply did not qualify where the recipient lacked predominant direction and the supplier retained predominant control.

Accenture Services Ltd supplied employees to Barclays Bank Plc under a secondment agreement. The employees remained employed by Accenture Services Ltd. Barclays paid their remuneration and related employment costs directly. The arrangement formed part of a wider outsourcing contract under which Accenture (UK) Ltd managed Barclays’ information technology function.

HMRC decided that the supply did not qualify for an extra-statutory staff concession. It issued a preferred decision that the arrangement was not a supply of staff for the concession, and an alternative decision that Accenture Services Ltd was not an employment business within the meaning of the Employment Agencies Act 1973. The applications for judicial review challenged those decisions.

The central issues were the proper interpretation of the concession, the appropriate standard of review, and whether the contractual and commercial arrangements satisfied its two conditions.

1. Standard of review. The claims were dismissed. The court determined the proper interpretation of the extra-statutory concession and the scope of the substantive legitimate expectation relied upon. HMRC’s evaluative judgments on whether the concession applied were reviewable for rationality, by reference to the material available when the First Decision Letter was issued. HMRC were entitled to a wide margin of judgment given their statutory role, expertise, and the complexity of the contractual arrangements.
2. Nature of the concession. The concession was an HMRC policy which departed from the ordinary VAT regime and operated according to its own terms. The claimant had to show that its case fell clearly within those terms. It could not reformulate the concession by reference to alleged requirements of EU VAT law and then claim the benefit of the reformulated policy.
3. Condition (a). Under section 13(3) of the Employment Agencies Act 1973, “under the control of” required an overall evaluative judgment about practical control transferred and retained. The statutory phrase required predominant practical control by persons other than the supplier, although it did not require the full control characteristic of a contract of service. The contractual documents rationally supported HMRC’s conclusion that Accenture Services Ltd retained predominant control. Accenture (UK) Ltd’s practical control was exercised indirectly through Accenture Services Ltd and was therefore not treated as independent control by another person.
4. Condition (b). The concession incorporated the general guidance defining a supply of staff as the provision of an individual who came under the direction of the recipient company. “The direction” required predominant practical directive power where control was divided. Barclays did not acquire that predominant direction. The outsourced IT arrangement was predominantly directed by Accenture (UK) Ltd and Accenture Services Ltd.
5. The supply therefore fell outside the concession, and HMRC were entitled to require Accenture Services Ltd to account for VAT. The applications for judicial review in relation to the First Decision Letter were dismissed. The separate challenge to HMRC’s second alternative decision was not before the court.

First instance judicial review decision. No appellate history is stated in the judgment.