McCann Media Limited v The Commissioners for HMRC

Under the intermediaries legislation, the tribunal must first identify the actual contractual arrangements, then ascertain the hypothetical contract between the worker and client, and finally decide whether that contract is one of employment. The analysis may be iterative, provided ordinary contractual principles are applied. Mutuality of obligation does not require the employer to provide work in addition to agreed remuneration, or the worker to accept every offer of work. Concurrent work for another organisation is not necessarily inconsistent with employment, particularly where restrictive covenants apply. The tribunal must consider the relevant contractual terms and circumstances as a whole, but need not discuss every clause expressly.

McCann Media Limited appealed against the First-tier Tribunal’s dismissal of its appeal concerning PAYE and national insurance determinations for the tax years 2013/14 to 2017/18. The FTT held that the intermediaries legislation applied to arrangements under which the appellant supplied Neil McCann’s services to British Sky Broadcasting Limited.

Permission to appeal was granted on three grounds: mutuality of obligation; the FTT’s treatment of other contractual circumstances; and its application of the three-stage approach to the hypothetical contract. The central issue was whether the FTT had made an error of law in concluding that the hypothetical contract between Mr McCann and Sky would have been a contract of employment.

1. Appeal dismissed. The FTT had made no error of law in concluding that the intermediaries legislation applied.
2. Section 49(1)(c) of the Income Tax (Earnings and Pensions) Act 2003 requires a statutory hypothesis: the tribunal must consider whether, if the services had been provided directly by the worker to the client, the worker would have been regarded as an employee. The appropriate structure is: (i) identify the actual contractual arrangements and relevant circumstances; (ii) ascertain the hypothetical contract; and (iii) decide whether it would be a contract of employment.
3. The third stage is assessed using the principles in Ready Mixed Concrete. Mutuality of obligation was established on the FTT’s findings. Sky was obliged to pay the agreed remuneration in regular monthly instalments, irrespective of the amount of work performed. An employer need not have a separate obligation to provide work in addition to an obligation to pay remuneration.
4. Mr McCann’s ability to undertake the temporary Dundee FC appointment did not negate mutuality or make employment impossible. An employee may serve more than one employer, or may be employed by one employer while carrying on business for other clients. The relevant contractual restrictions, including limits on providing similar services to other broadcasters and non-compete obligations, meant that the relationship was not one of unrestricted contractual autonomy.
5. The FTT had considered the relevant provisions of the actual contracts and the circumstances. Indemnity provisions involving the intermediary would not translate directly into the hypothetical contract, to which the intermediary was not a party, and were not inherently inconsistent with employment. The termination provisions had also been considered. The FTT was not required to refer expressly to every clause, particularly clauses not relied on before it.
6. The FTT’s use of the expression “blurring” between stages one and two was not an error of law. Its reasoning showed that it had considered the actual contractual arrangements before determining the hypothetical contract. Its inference that an invoice for May 2017 would have been payable arose from the actual contract, not from the hypothetical contract.

• First-tier Tribunal (Tax Chamber): dismissed the appellant’s appeal against PAYE and national insurance determinations and notices. The decision is cited as [2012] UKFTT 104 (TC).
• Upper Tribunal (Tax and Chancery Chamber): dismissed the appeal and upheld the FTT’s decision.