ITV Services Ltd v HM Revenue and Customs

Where an appeal turns on the interpretation of contracts said to incorporate terms from other agreements, the appellate court should have the complete contractual materials and focused submissions before deciding the issue. If relevant incorporation arguments arise late, the court may adjourn the appeal and direct the parties to agree representative contracts and identify the incorporated provisions. The appeal should then be restored for argument on the contracts as a whole. No final decision on liability follows until that process is complete.

ITV Services Limited appealed against the Upper Tribunal (Tax and Chancery Chamber)’s decision, released on 7 February 2012, which had dismissed its appeal from the First-tier Tribunal (Tax), whose decision was released on 23 November 2010.

The dispute concerned secondary class 1 national insurance contributions on entertainers’ earnings under the Social Security (Categorisation of Earners) Regulations 1978. ITV argued that the remuneration did not include salary within paragraph 5A, particularly because it was not computed by reference to the time worked. HMRC relied on general agreements which it said were incorporated into the sample contracts. The central issue was whether the appeal could properly be determined without examining those agreements and the alleged incorporated terms.

Appeal adjourned. The Court of Appeal did not determine whether ITV was liable to pay secondary class 1 national insurance contributions.

1. The merits turned on the proper interpretation of paragraph 5A, column (B), of the Social Security (Categorisation of Earners) Regulations 1978. The relevant question was whether the entertainers’ remuneration included a payment by way of salary, including whether it was computed by reference to the amount of time for which work had been performed.
2. HMRC raised, for the first time in its response, general agreements between unions and ITV. HMRC submitted that provisions in those agreements were incorporated into the sample contracts. That submission appeared correct in principle, but neither tribunal had discussed the incorporation issue or its effect.
3. The agreements were voluminous. The court considered that it could not reach a satisfactory conclusion on contractual interpretation without having the whole relevant agreements before it and hearing focused argument from both parties. The practical course was therefore to adjourn the appeal.
4. The parties were directed to discuss and, so far as possible, agree an appropriate number of sample contracts, the extent to which they incorporated other contractual terms, and the terms incorporated. The appeal was to be listed as soon as possible after 1 March 2013. The same three judges retained the appeal, with liberty to apply on paper for further directions.

1. Court of Appeal (Civil Division): On 13 December 2012, the appeal was adjourned to a date to be fixed, with directions for further contractual materials and submissions.
2. Upper Tribunal (Tax and Chancery Chamber): Decision released on 7 February 2012, dismissing ITV’s appeal from the First-tier Tribunal.
3. First-tier Tribunal (Tax): Decision released on 23 November 2010.