Aramark Limited v The Commissioners for HMRC

This appeal concerns a decision (Decision) by HM Revenue & Customs (HMRC) requiring payment of secondary Class 1 National Insurance Contributions (2ary C1 NICs) by Aramark Ltd (Appellant) in the period 6 August 2011 to 5 April 2012 and tax years ended 5 April 2013 and 2014 in the sum of £6,830,899 with statutory interest thereon. The Decision was issued on 8 January 2021 pursuant to section 8(1)(c) Social Security Contributions (Transfer of Functions, etc) Act 1999, HMRC having concluded that the Appellant was liable to pay 2ary C1 NICs by virtue of the application of Paragraph 9 Schedule 3 Social Security (Categorisation of Earners) Regulations 1978 as amended in 1994 but prior to the later amendment in 2014. These provisions are commonly referred to as the Host Employer Provisions (HEP).

The Appellant is part of a group of companies headed by the Aramark Corporation, a US corporation headquartered in Philadelphia, Pennsylvania which owns businesses that provide food services, facilities and uniform services to hospitals, universities, schools, sports stadiums, and businesses with remote workplaces. The Appellant was (and remains) one of the operating subsidiaries and its business includes the provision of catering and hospitality services to offshore installations (Offshore Installations) located in the North Sea, several hundred miles from Aberdeen on the United Kingdom Continental Shelf (UKCS).

Pursuant to contracts entered between the Appellant and the operators (Operators) of the Offshore Installations the Appellant was required to provide skilled personnel, tangible goods, and equipment, including food, cleaning and housekeeping materials together representing the services necessary to provide hotel and catering services to the Operators’ staff working on the Offshore Installations.

In the period from 8 October 2004 until 11 March 2017 the Appellant met its contractual commitments to some of the Operators utilising resources supplied to the Appellant by Aramark US Offshore Services LLC (formerly Aramark US Offshore Services Inc) (OSI) pursuant to an agreement between the Appellant and OSI dated 1 June 2005 (Intercompany Agreement). The detailed terms of the Intercompany Agreement are discussed below; however, pursuant to the Intercompany Agreement, the employees of the Appellant which had previously been used by the Appellant to service the Operator contracts were transferred to OSI and the Appellant agreed to provide certain defined services to OSI to facilitate the provision of services from OSI back to the Appellant.

The Intercompany Agreement was entered into as part of arrangements intended to ensure that the Appellant remained competitive in the market for the services it provided to the Operators by seeking to eliminate the cost of 2ary C1 NICs. The Appellant believed (and continues to maintain) that the arrangements were successful in doing so because OSI (an entity not being relevantly resident or having a presence in the UK) employed the personnel through whom the hotel and catering services were provided but did not cause the personal service of those employees to be made available to the Appellant within the terms of the HEP.

For the reasons set out in detail below we dismiss the appeal.

There is no dispute between the parties as to the meaning or application of the statutory framework of which the HEP forms part. As a consequence, we only provide the highest-level summary of it as appropriate context.

The statutory framework concerning the liability to pay C1 NICs is provided for under Social Security (Contributions and Benefits) Act 1992 (SSCBA), the provisions of which apply subject to residence or presence in Great Britain. Pursuant to section 6 SSCBA C1 NICs are payable in two parts in respect of earnings from an employed earner’s employment: the first part (primary contributions) are payable by the earner, the second part (secondary contributions) are payable (as determined by section 7(1)(a)), in the case of an earner employed under a contract of service, by the employer. “Earnings” are defined in section 3(1) as remuneration or profit derived from employment. An “employed earner” includes a person who is gainfully employed in Great Britain under a contract of service (section 2(1)(a)).

Thus, and subject to the provisions of Social Security (Categorisation of Earners) Regulations 1978 SI 1978/1689 (SSCER), primary C1 NICs, will usually be payable only in respect of the earnings of an individual, resident/present and gainfully employed in Great Britain and 2ary C1 NICs will only be payable where the individual is so employed by an employer which is also resident/present in Great Britain. For these purposes Great Britain is deemed to include the UKCS. The SSCER extend the net as to (or in some instances simply make clear) who counts as a secondary contributor in relation to specified categories of employment.

Subject to the provisions of the HEP (one of the categories of employment provided for under SSCER) the parties are agreed:

As such, and unless the HEP applies, whilst the individuals are liable to primary C1 NICs there is no liability for 2ary C1 NICs.

Given the critical importance of the HEP it is appropriate to set out its terms and the authority under which it was made in full. We also set out the terms of the explanatory note, HMRC guidance and other material on which the parties rely.

Section 7(2) SSCBA (formerly section 4(5) Social Security Act 1975) provides:

“In relation to employed earners who—

(a)

are paid earnings in a tax week by more than one person in respect of different employments; or

(b)

work under the general control or management of a person other than their immediate employer,

and in relation to any other case for which it appears to the Secretary of State that such provision is needed, regulations may provide that the prescribed person is to be treated as the secondary contributor in respect of earnings paid to or for the benefit of an earner.”

Pursuant to that authorising provision Regulation 5 SSCER (as amended by the Social Security (Categorisation of Earners) (Amendment No 2) Regulations 2003, SI 2003/2420) provides:

“(1)

For the purposes of section 4 of the Act (Class 1 contributions), in relation to any payment of earnings to or for the benefit of an employed earner in any employment described in any paragraph in column (A) of Schedule 3 to these regulations, the person specified in the corresponding paragraph in column (B) of that Schedule shall be treated as the secondary Class 1 contributor in relation to that employed earner.”

The HEP is specified in paragraph 9 of Schedule 3 SSCER78 as inserted by Regulation 4 Social Security (Categorisation of Earners) Amendment Regulations 1994 (SI 1994/726) (Amendment Regs) in exercise of powers conferred on the Secretary of State “by sections 2(2), 7(2), 122(1) and 175(1) to (3) of [SSCB92] and of all other powers enabling him in that behalf”.

With effect from 6 April 1994, paragraph 9 Column (A) has identified the following category of employment:

“Employment by a foreign employer where—

(a)

in pursuance of that employment the personal service of the person employed is made available to a host employer; and

(b)

the personal service is rendered for the purposes of the business of that host employer; and

(c)

that personal service for the host employer begins on or after 6th April 1994.

Where the employment is as a mariner, this paragraph only applies where the duties of the employment are performed wholly or mainly in category A, B, C or D waters.”

As a consequence Column (B) specifies that “the host employer to whom the personal service of the person employed is made available” shall be the secondary contributor.

The relevant definitions for interpretation of these provisions are set out in Regulation 1 SSCER (as amended by the Amendment Regs):

““foreign employer” in paragraph 9 Schedule 3 to these regulations means a person:

(a)

Who does not fulfil the conditions as to residence of presence in Great Britain prescribed in section 1(6)(a) of the [SSCBA]; and

(b)

who, if he did fulfil those conditions as to residence or presence in Great Britain referred to in (a) above, would be the secondary contributor in relation to any payment of earnings to or for the benefit of the person employed;

“host employer” in (paragraph 9 Schedule 3) to these regulations means a person having a place of business in Great Britain.”

The Explanatory Note to the Amendment Regs relevantly states:

“Regulation 4 amends Schedule 3 to the principal Regulation by extending the description of employments in respect of which persons are treated as secondary Class 1 contributors to workers seconded on or after 6^th April 1994, by foreign employers to employers in Great Britain.”

As it was referred to by the parties as a comparison for the purposes of interpreting paragraph 9, we note that for the period during which OSI employed the relevant individuals for whom secondary C1 NICs have been determined as payable, from paragraph 2 Column (A) Schedule 3 provided:

“Employment, whether or not under a contract of service (not being employment described in paragraph 2 in column (B) of Schedule 1 of these regulations or an employment to which paragraphs 1, 4, 5, 7 or 8 of this Schedule applies) in which the persons employed renders, or is under an obligation to render, personal service and is subject to supervision, direction or control, or to the right of supervision direction or control, as to the manner of the rendering of such service and where the person employed is supplied by or through some third person (including, in the case of a body of persons unincorporate, a body of which the person employed is a member) and (a) where earnings for such service are paid by or through, or on the basis of accounts submitted by, that third person or in accordance with arrangements made with that third person; or (b) where payments, other than to the person employed, are made by way of fees, commission or other payments of like nature which relate to the continued employment in that employment of the person employed”

With effect from 6 April 2014 paragraph 9 to Schedule 3 was amended. The terms of the HEP were reframed to be more expansive and a new anti-avoidance provision was introduced as paragraph 5A to SSCER. Paragraph 5A introduced a main purpose test when applying the amended HEP.

HMRC’s Guidance on Offshore Intermediaries includes an explanation of the HEP:

“The host regulations

17.

The host employer regulations are provided for at paragraph 9 of Regulation 5 in Schedule 3 to the Social Security (Categorisation of earners) Regulations 1978 (SSCER 1978).

Key points on the host regulations

18.

The bulleted list below summaries the key points relating to HMRC’s approach to determine whether there is a host employer.

-

HMRC’s overall approach is that the host regulations can apply in an arrangement where the worker works in a broad sense for a third party

…

Relevant legislation (pre-6 April 2014)

20.

This is provided for in paragraphs 2 and 9 of Regulation 5 in Schedule 3 to the SSCER 1978. Paragraph 9 is referred to as the “host regulations” whereas paragraph 2 is referred to as the “agency regulations”.

21.

… [see paragraph 16 above]

HMRC’s view of these conditions is set out at paragraph 23 below.

…

23.

HMRC’s view of the meaning of the conditions in paragraph 9 of Regulation 5 to the SSCER 1978 is as follows:

Para 9(a) “in pursuance of that employment the personal service of the person employed is made available to a host employer”

-

The condition at (a) above is met when the worker is, as a matter of fact, providing their service to the host employer.

-

Where an individual worker is not named in the contracts, it is HMRC’s view that this does not mean that the legislation cannot apply if other evidence points to personal service.

-

A worker is providing personal service to a host employer where we identify accepted elements of personal service; the obligation to perform tasks for the host employer.

-

The personal service is “rendered for the purpose of the business of that host employer”.

…

Composite Service

29.

A composite service can include personal service, and that members of a crew can still be providing their personal service. Arrangements must be looked at from the perspective of the worker and his employment obligations.

30.

HMRC accept that where the arrangement is a legitimate contract for the provision of a complete service, and the workers, as a matter of fact work for the provider of that service and not the host, these provisions were not intended to apply.

EXAMPLES

-

A contract to provide crew and equipment may be viewed as composite since it comprises both the provision of labour and the provision of equipment. If, however, within the provision of labour the crew (workers) are required to provide their personal service to a host employer then the Host Regulations may still apply to that contract.

-

A contract is comprised of the provision of a whole crew made up of various job roles. This is still a contract for labour, simply different types of labour to deliver an overall service. If within that contract the various workers are required to provide their individual personal service to a host employer then the Host Regulations may still apply.

-

Where a contract delivers an overall service to a host employer, or other client, and the workers’ personal service is not required to be provided to the host employer as part of that contract, i.e. they are only required to be provided to the overseas employer, then the Host Regulations would not apply. ”

And by way of a parallel to the distinction drawn between a situation in which HMRC consider there to have been a supply of staff by an agency and the provision of a complete service, HMRC’s guidance ESM2003 states:

“If the agency worker is not engaged under a contract of service the next step in deciding whether the legislation applies is to understand exactly who is contracting with whom to do what. For example, a company requiring some typing work, which is beyond the capacity of its regular staff, could …

engage an independent contractor to do the work. The contractor undertakes to do the typing work using his own staff, who may be either employed or self-employed depending on the terms and conditions of engagement. In this case the agency legislation does not apply because the contractor is providing a typing service. They are not providing typists. The position is the same as, for example, a plumbing firm that undertakes some plumbing work for a client. The plumber who actually does the work is working for the plumbing firm, not rendering personal service to the client.

The parties agree that the issue(s) for us to determine are as follows:

We are grateful to all Counsel for their clear skeletons, submissions, and willingness to engage with our questions. We set out below our summary of those submissions on the law and, at paragraphs 155 to 159 in respect of the facts. The parties should, however, be assured that when preparing this judgment, the terms of the skeletons were reread and the transcript reviewed. Because we do not deal specifically with any point does not mean that it was not considered in the round when reaching our decision.

The Appellant’s starting point was to invite us to determine whether “the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically” (as per [66] UBS AG v HMRC [2016] 1 WLR 1005). In this regard, and in summary, it was contended that the purpose of the HEP, determined by reference to its language, the explanatory note and as reflected in HMRC’s guidance, was to create a charge to 2ary C1 NICs on a British host without a direct contract of employment with the worker only where that host exercised substantive day-to-day control over the work/personal service of the worker akin to the situation of a secondee. Where, however, substantive control over the day-to-day activities of the foreign employer’s employees remained with the foreign employer the HEP cannot apply and no 2ary C1 NICs charge arises in Great Britain.

A number of observations on the language of the HEP were made:

The Appellant recognised the centrality of importance of the concepts of mutuality of obligation/personal service and control in the context of establishing a relationship pursuant to which parties are engaged by way of a contract of service (employment) or a contract for services as set out in the seminal judgments of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 (at 515) and Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318 (at [18] – 24]).

Flowing from these observations the Appellant submitted:

In this regard Mr Grodzinski sought to place a firm line between “control” in the sense envisaged to establish whether an individual was engaged under a contract of service or a contract for services (as per RMC and Montgomery) and the practical and substantive exercise of control required in order for the host employer to become liable to 2ary C1 NICs. It was accepted that the “control” necessary to establish that an individual is an employee is, to a degree, flexible and dependant on both the circumstances of the work and the individual such that an appropriate framework of control will be sufficient. Where the HEP is in question it will have already been established that the necessary framework of control resides with the foreign employer (otherwise the foreign employer would not be the employer at all). Such framework of control was explained to exist above the level of day-to-day control. On the basic employment question day-to-day control may be illustrative as to where the framework of control lies but will not be determinative. However, it is the more granular detail identifying where the practical and substantive exercise of control in the minutiae of operations rests which is determinative for the HEP to apply.

Support for this interpretation was said to be confirmed by the authorising statute and as explained in the explanatory note.

Mr Grodzinski contended that the relevant authorising provision was section 7(2)(b) SSCBA which explicitly requires that secondary legislation providing for an extension of the scope of the 2ary C1 NICs charge requires the secondary contributor to be under the general management or control of the contributor. However, even were it to be the case that the HEP was implemented more generally within the vires of section 7(2) SSCBA that did not preclude a conclusion that the exercise of control, in the sense contended for, by the host was required as the purpose of the Treasury in bringing forward the HEP could be discerned from the explanatory note.

As set out above the explanatory note explicitly states that the HEP was intended to cover “workers seconded” by foreign employers to host employers in Great Britain. It was argued that a seconded worker was to be generally understood as describing an individual working for someone other than their contractual employer as a de facto employee in practice of that other. Examples of such interpretation were provided:

The Appellant accepted that the terms of the explanatory note did not define the concept of a secondment and that in ordinary parlance, as confirmed in Pervez, it could come in different shapes and sizes. However, it was contended that particular weight should be given to the explanatory note. This was on the basis, at a general level, that explanatory notes may often represent the only demonstrated purpose for negative resolution secondary legislation which will rarely have been the subject of formal Parliamentary consideration and is conventionally drafted by the department proposing the statutory instrument. In such circumstances, the explanatory notes will provide a reliable guide to the mischief/lacuna it is intended to address.

Goldman Sachs International v HMRC [2010] UKFTT 205 (TC) supported a conclusion that the HEP applied where the foreign employers employees were treated, at least on a day to day basis as if they were the employees of the host. That case concerned whether Goldman Sachs International (GSI) was liable to 2ary C1 NICs as a host employer in respect of workers employed by Goldman Sachs Services Ltd (GSSL) and formally seconded to GSI. It was accepted on the facts that if GSSL had no place of business in Great Britain then GSI would be the host employer and liable to 2ary C1 NICs. However, GSI contended that the unrepresented GSSL had a presence in Great Britain such that it could not be liable to the 2ary C1 NICs. In that context in that appeal the Tribunal observed at paragraph [46]:

“It seems clear that [the test in sub-paragraph (a) in paragraph 9] means that there must be in place an agreement between the contended foreign employer and the contended host employer that specifically covers the position of the individual primary Class 1 contributor. [The test in sub-paragraph] (b) is a factual test – the primary contributor provides “the personal service” for which he or she is employed to the host employer. I take that to mean that, looking at the matter broadly, the arrangement is that the primary contributor works for the host employer rather than the foreign employer as an employee (and not, for example, as a consultant). This would exclude cases where someone works for both the foreign employer and the host employer to a significant extent but under a single contract of employment. I adopt that interpretation because of the use of the definite article “the” before the reference to personal service. If it were a reference to “personal service” without the definite article then it could be argued that any part of the personal service of the individual would activate the test. On the reading I adopt, and subject to clarification of the proper burden of proof in applying the provision, it must be shown as fact in a broad sense that the individual is working for the host employer and not the foreign employer.”

Having set out these observations Judge Williams went on to determine that GSSL was a foreign employer and, before concluding that GSI was a host employer and liable under the section 8 decisions, stated:

“The personal service of GSSL employees present in Great Britain was, largely but not entirely, made available to GSI. … On the assumptions I have made, the two named individuals against whom the section 8 decisions were made were seconded in this sense to GSI. They worked for GSI and not for GSSL. I have no evidence that, having been seconded to GSI, they did anything other than render personal service for the purposes of the business of GSI, and I so find. …”

The Appellant accepts that HMRC’s guidance may not be used as a legitimate aid to statutory interpretation as per HMRC v K E Entertainments Limited [2020] UKSC 28, but contends that HMRC’s published position as set out in the Offshore Intermediaries Guidance paragraph [30] (set out above in paragraph 22) and ESM2003 (set out at paragraph 23 above) is consistent with its own submission. That guidance accepts that where the foreign employer/agent’s supply is of a complete service consisting of a range of components including the output of employees there is no supply of personal service within the HEP or agency provisions.

With the HEP limited to a situation akin to a secondment (or the shift of day-to-day operational control of the duties of the workers) the Appellant contends that the commercial sanctity of international subcontracting is preserved. As such we should ask ourselves whether, on the facts:

The Appellant’s suggested interpretation was also considered to align with the provisions of paragraph 2 to schedule 3. As set out in paragraph 20 above, paragraph 2 renders an agency liable to 2ary C1 NICs where an individual who is contracted (whether under a contact of services or a contract for services) to the agent and who performs their personal service under the supervision, direction or control of the agent. The requirement that direction and supervision be explicit is necessary because of the wider remit of the provision beyond a pure employment scenario. However, both paragraph 2 and the HEP are triggered only where “supervision, direction and control” are exercised by the party to which the 2ary C1 NICs obligation is ascribed.

Final affirmation that the Appellant’s interpretation of the HEP is correct was also said to come from the amendment made to the HEP in 2014. Whilst the Appellant acknowledged that subsequent amendment to legislation was not generally an aid to interpretation (as per Project Blue Ltd v HMRC [2018] UKSC 30 at [33]) the principle that Parliament does not legislate in vain (as confirmed recently in the case of R (oao Hertfordshire County Council) v Secretary of State for Housing, Communities and Local Government [2021] EWHC 1093 (Admin)) demonstrated that the provisions of the HEP in force between 1994 and 2014 did not impose the liability now sought to be imposed, otherwise the broadening of the scope of the HEP effective from 2014 would be otiose. By reference to the explanatory note for the 2014 changes the terms of the revised legislation were not stated to clarify the previous statutory provisions but to amend them in order to assist with enforcement.

The Appellant challenged HMRC’s position that the HEP was an anti-avoidance provision. It did not contain a main or unallowable purpose requirement, in marked contrast to the provisions of section 5A SSCBA introduced in 2014 alongside the broadening of the provisions of paragraph 9.

On the question of the relevance or otherwise of the asserted tax avoidance motive for the implementation and continuation of the arrangements pursuant to which OSI supplied the Appellant under the Intercompany Agreement, the Appellant contended that the line of authorities including and concluding with HMRC v Altrad Services Ltd [2024] EWCA Civ 720 (Altrad) had no effect on the correct interpretation and application of the HEP. Mr Grodzinski accepted that if his case on the substantive exercise of day-to-day control failed then the Appellant’s appeal failed. However, if he succeeded on that point, any tax avoidance motive which may be established could not in his view cause an alternative view of the application of the HEP. On the basis that the requisite day-to-day control of the workers by OSI was proven there was no application of the HEP which permitted such control to be ignored as it is not contrived or artificial or in any way tainted by the purpose underlying the implementation of the arrangements by which that control was brought about. Further, the purpose of the HEP could not be said to have been subverted; the Appellant would simply have established the factual matrix which ensures that neither the actual legal employer (who is out of the jurisdiction) nor the recipient of the supplies of hotel facilities are subject to a 2ary C1 NICs charge.

The Appellant contends that HMRC’s interpretation of the HEP cannot be correct. If the HEP is engaged simply because there is a contractual obligation of personal service owed by the employee to the foreign employer who may then direct the employee to work in Great Britain within the host employer’s business the HEP would apply whenever work was carried out by a service provider present outside Great Britain.

HMRC broadly agree with the proposed approach to interpretation we were invited to adopt by the Appellant as set out at paragraph 26 above.

However, HMRC made some wider submissions regarding what they asserted to be a plain tax avoidance motive and the extent to which it should affect the approach we adopted. In their skeleton argument HMRC’s position on avoidance was set out as:

“In so far as necessary, HMRC will also refer to Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16 [11] – [17] and in particular to the point at [12] that, as an application of these general principles, where a scheme aimed at avoiding tax involves a series of steps planned in advance, it is both permissible and necessary not just to consider the particular steps individually but to consider the scheme as a whole.”

By their note on evidence/closing submissions, and at our invitation, HMRC set out their position on the application of Altrad which they considered reinforced their submission as the Court of Appeal confirmed that: “it is not generally to be expected that Parliament intends to exempt from tax a transaction which has no purpose other than tax avoidance”; “if a taxpayer enters into a transaction that does not appreciably affect his beneficial interest except to reduce his tax the law will disregard it”; and it was of “no less importance” to consider tax avoidance schemes as a whole and as they were intended to operate. Applying these principles the note proceeds to adopt a position that on the facts of this case, and by reference to the terms of the HEP as a charging provision, the Appellant had sought to exclude themselves from the charge with the consequence that we should apply the Rossendale/Altrad analysis so as to deprive the arrangements of their intended effect.

When making oral submissions, Mr Tolley confirmed that the approach we were to adopt was one of viewing the facts realistically and applying the legislation purposively. We were, in particular, invited to construe the words “making available” as coloured by the tax avoidance motive of the arrangements. This was so because one of the obvious purposes of the HEP was to prevent avoidance of 2ary C1 NICs by the use of a foreign employer. In this regard, and in response to a question from the Tribunal as to how far this point went, Mr Tolley confirmed:

“[the tax avoidance purpose] is part of the circumstances that are before you. But what I am not purporting to suggest to you, judge, that you – you will reach a point in the analysis where you think “ah I’m with the appellant but for the fact that it was an avoidance purpose” and then “oh, but it is an avoidance purpose, so I have to reverse my view”.

Mr Tolley reinforced that the facts and context of what he considered and described as tax avoidance arrangements gave credence to a conclusion that the personal service of each employee was made available by OSI to the Appellant in order that the Appellant could continue to operate the business post-2004 as it had pre-2004.

Regarding the relevant language of the statute which is to be purposively construed HMRC focused on: “personal service” and “making available”.

By refence to the seminal textbook on statutory interpretation: Bennion, Bailey and Norbury on Statutory Interpretation (Bennion), we were invited to interpret the HEP as a whole and by reference to a presumption that the legislature was aware of existing common and statute law when the HEP was introduced in 1994. As there is a significant overlap between employment law and payroll taxes including NICs we are entitled to import the established concepts and the legal meaning of phrases inherent within the body of employment law when interpreting the HEP.

As a starting point in this regard it is a broad and well-established principle that in respect of any particular employment there will be only one employer (see Fire Brigades Union v Embery [2023] EAT 51). On that basis a bifurcated concept of a contractual versus a de facto employer was novel and unmoored to any pre-existing legal analysis within employment law.

As to personal service, HMRC contended the words reflected precisely the well-understood part of the definition of a contract of service (as opposed to a contract for services), namely the obligation that the employee work “by one’s own hands”, not “by another”: Ready Mixed Concrete [1968] 2 QB 497 per MacKenna J at 515C-E; and the long line of cases which had followed.

HMRC contend that it is the employees’ obligation to the foreign employer to work by their own hands which, when made available to the host employer, lays the foundation for the HEP to apply. By their skeleton HMRC state: “It is this obligation (of the employee) which must be made available to the host employer. The requirement is that the foreign employer make available to the host employer that which the foreign employer has at its disposal: the obligation of personal service owed to the foreign employer by its employees.” Thus, it is sufficient for the HEP to be triggered that a foreign employer directs (or is taken to have directed) its employees to work for the host; it then matters not from whom the employee takes instruction or direction as to their terms or manner of performance of their day-to-day activities.

As set out in their skeleton, HMRC contend this position is supported by:

The personal service so made available must be rendered for the purposes of the host employer’s business pursuant to paragraph (b) of the HEP. HMRC contend that the concept of “personal service” envisaged under paragraph (b) is obviously and necessarily the same as under paragraph (a) (i.e. the performance by the employee of the obligation owed contractually to the foreign employer) but the personal service must also be rendered for the purposes of the host employer’s business. In HMRC’s submission there is no requirement for the host to exercise control, supervision, or direction in order that the personal service be rendered for the purposes of the host’s business.

HMRC also accepted that the explanatory note was an admissible aid to interpreting the HEP but submitted that it provided little assistance in the present case. HMRC urged us to avoid being sucked into an exercise of interpreting the explanatory note with a view to it shedding light on the meaning of the statutory language chosen. Thus, there was no utility in seeking to understand what was meant by the words “workers seconded” in the explanatory note and/or the level of control to be expected to be exercised by the recipient of a secondee in order to then identify the relevant statutory test for the HEP. As a codicil to this point HMRC contend that there is, in any event, no fixed meaning of secondment nor a particular general understanding of what amounts to a secondment. As articulated in Pervez secondments “come in all shapes and sizes”.

The relevance of Goldman Sachs was marginalised by HMRC. They contend that the parts of the judgment on which the Appellant seeks to rely are “doubly obiter” and do not, in any event, set out any strict rule that an employment-type relationship must be found for the HEP to apply.

As to the Appellant’s reference to HMRC’s Offshore Intermediaries guidance, HMRC point to the fact that the guidance in question post-dates the 2014 amendment and that on its terms it provides no reasoning capable of assisting the Appellant not least of all because, in any event on the evidence, OSI does not, in HMRC’s view, provide a complete service to the Appellant. Similarly, in HMRC’s view, the examples given in ESM2003 are irrelevant as it is not addressing the HEP.

HMRC’s alternative argument was that if the Appellant were correct that control was necessary for the HEP to be triggered the “control” required could not be equated to “control” in an employment law context as, if the host controlled the worker, the host and not the foreign employer would be the legal employer of the worker. Thus, some lesser control must be sufficient to invoke the HEP. HMRC submit that such lesser control will be evident where it can be shown, consistently with the approach confirmed by the Court of Appeal in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501 (Atholl CA) and considered in Crista Ackroyd Media Ltd [2019] UKUT 327 (TCC) (Ackroyd), that there is a framework of control which is sufficient.

As set out above, both parties invited us to construe the words of the HEP purposively and to apply the facts realistically. In order to construe the words purposively, we must understand the purpose. HMRC contend that the HEP is an anti-avoidance provision to be interpreted, as a minimum, to catch situations in which a UK employer moves the legal aspects of employment offshore whilst continuing to use the workers in the same way as when they were employed onshore. The Appellant contends that the HEP is intended to treat a host as the secondary contributor where that host has effective and substantive control of the day-to-day activities of the workers.

Our view as to purpose is more reflective of the Appellant’s position than HMRC’s but we accept that it is highly likely that the situation which concerns HMRC would be caught by the HEP by reference to our view of the purpose. We consider that the HEP is intended to impose a liability to 2ary C1 NICs where a party (the host) stands in the shoes of an employer in terms of the substantive day-to-day control of a worker and where that worker is working in the host’s business but contractually employed by a foreign employer. We consider that such a purpose will catch those who artificially seek to place contractual employment outside Great Britain without affecting the daily operations to which the workers are directed and thereby the experience of those workers in the tasks that they perform.

In explaining our reasons for so concluding, we start with the provisions of section 7(2) SSCBA which authorise, so far as relevant in this appeal, the Treasury to make regulations providing that a prescribed person (here the host employer) be treated as a secondary contributor either because the employees of the foreign employer work under the general control or management of the host employer rather than the foreign employer and/or because it appeared to the Treasury that the host employer should be so treated.

We do not consider we need to decide explicitly which of these possible alternatives caused the Treasury to request the Secretary of State for Social Security to lay the SSCER before Parliament. This is because we consider that the terms of the explanatory note give us a sufficient statement of purpose with which to interpret the statutory language chosen. Both parties rightly accepted that the explanatory note may be used as an “aid” to interpretation. In this regard we note that explanatory notes are invariably drafted by the department responsible for introducing the legislation. They explain to Parliament the purpose for which a provision is to be introduced and are published alongside the act. As acknowledged by Lady Arden (in R (oao O a minor) v Secretary of State for the Home Department [2022] UKSC 3) explanatory notes began to be routinely prepared following the second report of the Select Committee on Modernisation of the House of Commons (HC 389, 1997-8) which expressly recognised that the courts might wish to use explanatory notes as a guide to determining Parliament’s intention. As such, and in accordance with the guidance given by the House of Lords in R (oao Westminster City Council) v National Asylum Support Service [2002] UKHL 38 (at paragraph [5]) an explanatory note which “casts light on the objective setting or contextual scene of the statute and the mischief at which it is aimed” will “always be admissible as aids to construction”.

The explanatory note to the HEP provides that it amends the provisions of Schedule 3, extending the description of employment in respect of which it was considered necessary to treat a party as a secondary class 1 contributor where workers are seconded by foreign employers to employers in Great Britain. Whilst we agree with HMRC that a forensic exercise seeking to interpret the language of the explanatory note is not appropriate, we consider that the explanatory note unquestionably casts light on the “objective setting or contextual scene” of the HEP and thereby Parliament’s purpose in its enactment. Without debate, as is usual for a negative resolution statutory instrument, it must fairly be assumed that Parliament intended to do that which it was asked to do. Using it as an aid to understand the purpose of the HEP so as to then interpret the language used and, recognising that secondments come in all shapes and sizes, it is our view that the purpose of the HEP is to treat as a secondary contributor a GB resident/present party utilising the personal service of workers (employed by a foreign employer) as if they were their own employees as this, in our view, is the critical feature of a secondment (in whatever shape or size).

We also consider that such a purpose marks an important line between a secondment-type relationship between worker and host employer which clearly was intended to be caught and that of a commercial subcontractor. That such a line exists is apparent on a purely practical level as the provision plainly was not intended to and does not catch commercial subcontracting (a point accepted by Mr Tolley before us) and this is reflected in HMRC’s Offshore Installation guidance which expressly excludes the possibility of the HEP applying where a contractor enters an engagement for a “complete” or “composite service” (as per paragraph 30).

Having so concluded that to be the purpose we consider that the interpretation of the language of the provision becomes a comparatively easy task though its application to the facts in any particular scenario, including this one, is not such an easy task.

Starting with “personal service”, we agree with HMRC that the term “personal service” must carry the meaning conventionally given in employment law. This is consistent with the basic tenets of statutory interpretation as set out in Bennion and summarised at paragraph 50 abto bee. As such, personal service means the worker’s “own work and skill in the performance of some service for [their] master” (from RMC).

We also agree that the employment law concept of “personal service” does not incorporate any requirement as to control. This is clear by reference to the “irreducible minimum” for a contract of service explained in Montgomery where the requirement for mutual obligation/personal service is discrete and distinct from the requirement for control:

“18 I consider the safest starting point to be the oft quoted passage of McKenna J in [RMC] …:

“I must now consider what is mean by a contract of service. A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He 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 master. (iii) The other provisions of the contract are consistent with its being a contract of service.”

19.

MacKenna J made plain that provided (i) and (ii) are present (iii) requires that all the terms of the agreement are considered before the question as to the existence of a contract of service can be answered. …

23.

Clearly, as society and the nature and manner of carrying out employment continues to develop, so will the court's view of the nature and extent of “mutual obligations" concerning the work in question and “control” of the individual carrying it out. … since the concept of the contract of employment remains central to so much legislation which sets out to adjust the rights of employers and workers, including employees, it must be desirable that a clear framework or principle is identified and kept in mind. … For my part, I regard the quoted passage from [RMC] as still the best guide and as constituting the irreducible minimum by way of legal requirement for a contract of employment to exist. It permits tribunals appropriate latitude in considering the nature and extent of “mutual obligations” in respect of the work in question and the “control” an employer has over the individual. It does not permit those concepts to be dispensed with altogether.”

It is then, in our view, critical to understand this second but discrete element of the irreducible minimum in the context of the further requirements for the HEP to be triggered.

When considering the concept of control the courts have explained that control over how the work should be done is relevant but not essential to the question as to whether a relationship of employment exists as the nature and extent of such control will vary dependant on both the role and the experience of the worker. However, where direct control as to “how” to perform personal service is not present there must be a framework of control as the absence of control is antithetical to a contract of employment. In this sense control reflects a requirement that in order to be an employee the ultimate authority over the worker in the performance of his work resides with the employer (see summary provided of case law up to and including Montgomery at paragraphs 19 – 21 of that judgment).

In Ackroyd the control necessary for the establishment of a contract of employment (whether actual or, in the case of the application of IR35 by way of the assumed or hypothetical contract) is described as having the right to exercise “ultimate” control over the provision of the worker’s services either by way of a direct contractual term or, where there was no express or implied term, through a sufficient framework of control. A distinction is drawn in Ackroyd (see paragraph [54]), by reference to the EAT judgment in White v Troutbeck SA [2013] IRLR 286, between day-today control of work and the situation where the employer “retained the right to step in and give instructions”. In Atholl CA the Court of Appeal has confirmed that the requirement for a contract of employment is control in the sense of what, how, where and when the worker carried out their work (see [99] – [107]) as appropriate in the context of the employment in question.

Having considered the various shapes and forms that control can take we must determine whether any form of control/direction is implicit firstly within the requirement of “made available” and secondly within the requirement that the personal service be “rendered”. We have determined it is not a requirement of “made available”. We accept that the personal service of a foreign employer’s employee can and will be “made available” to the host employer where the foreign employer puts the employee at the disposal of the host employer entitling them to deploy that worker in the performance of services by their own work and skill (as contended for by HMRC). We do so because we can see no other sensible interpretation to the ordinary meaning of the language of “made available”: made - to cause, arrange or compel; available – ready or able to be used, obtainable. On the basis that there is no relevant statutory definition and no historic case law providing a meaning other than the ordinary meaning we consider it entirely appropriate to apply the ordinary meaning of “made available”.

However, we see the distinction which appears to have been drawn by the Courts and tribunals when considering the concept of control as between “ultimate control” and “day-to-day control” to be important in interpreting subparagraph (b) of the HEP i.e. considering whether the personal service of each employee made available to the host employer has also been rendered for the purposes of the host’s business.

In this regard we note that the legislature chose to specify cumulative requirements for the HEP to apply. It would have been perfectly possible simply for the HEP to apply where the personal service of a foreign employer’s employee was made available for the purposes of the host employer’s business. So limited, putting the workers at the disposal of the host in circumstances in which the host could then decide whether, when and how to use the personal service so available would have been sufficient for the HEP to apply. However, the HEP applies only where “the personal service is made available” and “the personal service is rendered for the purposes of” the host employer’s business. We therefore consider, consistent with the presumption that Parliament intends meaning in the language it choses, the word “rendered” must be given some meaning.

When considering the meaning to be ascribed to “rendered” we have in mind the purpose of the provision we are interpreting and the line between commercial subcontracting and a secondment-like arrangement. We start with the ordinary meaning of “rendered”: caused to have become and/or performed. We consider that giving the word its ordinary meaning supports a conclusion that the personal service made available must have come, at some level, under the control of the host employer such that the host is using the personal service in a way of its choosing (rather than that of the foreign employer) within its business. In the broad (but all shapes and sizes) sense envisaged by the explanatory note, so interpreted, the worker has been seconded to the host and assimilated into its business.

It is in our view plain that the control required is not “ultimate control” of the type necessary to establish an employment relationship as, if the personal service rendered to the host involved the host having ultimate control, the host would be the employer and the HEP would be irrelevant. We therefore accept, though by a different journey, and with perhaps a number of nuances, the Appellant’s submission that what is required is for the circumstances, viewed as a whole, to support a conclusion that it is the host rather than the foreign employer which exercises control as to the day-to-day granular activities to be undertaken by the worker such that the host can realistically be considered to represent or stand in the shoes of the employer vis a vis the workers’ performance of their own work and skills.

We note that this conclusion is consistent with the limited view expressed by Judge Williams in Goldman Sachs when he described the HEP as invoked where “the primary contributor works for the host employer rather than the foreign employer as an employee (and not as a consultant)”.

Where the relevant control is exercised, we consider that the HEP provision will apply even where the foreign employer may also make available and render other aspects of a service. Thus a composite service of the type envisaged in HMRC’s guidance and which we consider to represent a commercial subcontracting relationship will not involve the making available and rendering of personal service by the foreign employer to the host employer. The foreign employer will exercise effective day-to-day control and direction of the workers as part of an overall provision of a wider service. Where however, personal service is made available and rendered such that the workers are seconded to the recipient the arrangements will fall outside that which would be recognised as a subcontracting relationship.

Finally, and for completeness we consider that the provision is all or nothing. There is no mechanism for apportionment and thus for the host to become liable under the HEP the whole of the worker’s personal service must be made available and rendered to the host. If the foreign employer retains the ability to divert the employee to other business of its own on a day-to-day basis (rather than generally as a consequence of the worker’s status as contractually employed) the host will not, subject to a Hurstwood/Altrad realistic view of the facts, become liable under the HEP. We note that this was the position recognised by Judge Williams in Goldman Sachs in the latter part of paragraph [45] by reference to the use of the definite article “the”. The provisions of paragraph (c) of the HEP which reference “that personal service” also supports this conclusion.

Having reached these conclusions we do not feel it necessary to consider the 2014 amendments to the HEP or the introduction of the specific anti-avoidance provisions.

As was known before this case was heard it is the second in a series of four appeals listed before the Tribunal concerning the HEP in the context of workers providing a range of services on offshore installations. The first matter heard was that of Bilfinger Salmis UK Limited v HMRC [2024] UKFTT 736 (TC). The judgment was issued after the hearing of this appeal and whilst the judgment was being written.

As is readily apparent from a reading of the judgment Bilfinger’s case was presented somewhat differently to that presented by the Appellant, though with some obvious similarities. Our discussion above addresses the arguments presented to us. HMRC’s case in each appeal held a consistency in its principal argument but also addressed the respective taxpayer’s arguments.

Once the judgment in Bilfinger was released, we invited submissions from the parties.

The Appellant submits:

HMRC contend:

We note that our decision on the legal arguments presented to us is similar, but certainly not identical, to that in Bilfinger. In particular we note:

The agreed background facts and the relevant dramatis personae are set out in the Introduction section and not repeated here. The remaining facts pertinent to the issues we have to decide which are agreed between the parties are as follows:

We note two further particularly important facts which we understand to have been agreed between the parties, but which were not recorded in the statement of agreed facts:

We were provided with a document bundle of 5,003 pages.

In addition we received witness statements from: Mr Andrew McLeod Thomson (AMT) current managing director of the Appellant’s Global Offshore division; Donna Joan Vass (DJV) formerly HR director for the Appellant’s Global Offshore division; and Douglas Norman Lowbridge (DNL) current Chef Manager on the Dunbar installation operated by Total Group. All witnesses gave sworn oral testimony and were subject to cross-examination and re-examination.

No evidence was given by any officer of OSI.

Given the volume of evidence made available to us this judgment is, necessarily, only a summary. We have carefully considered all documents from the bundle to which we were specifically referred by the parties or to which we have referred below. In doing so we are satisfied that we have acted in accordance with the overriding objective and cognisant of the guidance provided by the Upper Tribunal in Adelekun v HMRC [2020] UKUT 244 (TCC) in which it was stated:

We have not excluded from our consideration any document to which we were referred unless so indicated in our consideration of the evidence. However, we do not refer to every document; rather we refer to those on which we rely on to form our view.

In the sections concerning the evidence of the individual witnesses we set out the salient points of evidence as derived from their witness statements and through the lens of their oral testimony which, in the main, consisted of lengthy cross-examination. As the statements ran to over 50 pages and we took oral testimony over 3 days, our recitation of the witness evidence is also necessarily a summary.

The Appellant presented its evidence carefully by reference to “the Relevant Period” i.e. the period to which the Decision relates 6 August 2011 – 5 April 2014. Mr Tolley steadfastly challenged the relevance of limiting our field of perspective to that period. It is not clear to us why the Appellant so rigidly sought to tether the evidence to the Relevant Period. By reference to the documentary evidence and the evidence of each of the witnesses it is plain to us that the arrangements put in place from 8 October 2004 and effective until 11 March 2017 did not change materially over their period of operation. We have to determine whether in the Relevant Period the consequence of the arrangements rendered the Appellant liable to 2ary C1 NICs and that is what we do but we do so by reference to the evidence of the arrangements over the full period in which they were in operation. The fact that the legislative changes post 6 April 2014 rendered the Appellant definitively liable under the amended HEP does not affect the findings of fact we make on the evidence before us. Nor does the fact that HMRC were out of time to issue section 8 decisions for the period prior to 5 August 2011 affect our view as to the facts.

In this appeal the Appellant bears the burden of establishing that it is not liable as a host employer to pay 2ary C1 NICs. If we are satisfied on the balance of probabilities, by reference to the proper interpretation of the HEP and on the facts, that the personal service of the workers were not made available to the Appellant and/or rendered for the purpose of a business carried on by the Appellant, no liability will arise. If the Appellant cannot so satisfy us then the Decision will stand. There is no dispute as to the quantum of the sums due in the event that the Appellant is a host employer.

During the period 2003 – 2004 Deloitte provided advice to the Appellant concerning a proposed restructuring of the Appellant’s offshore services business in the UK. We were provided with the full report of a feasibility study from November 2003 and an executive summary document entitled “Aramark Limited – International Employment Plan” prepared in June 2004. The proposal followed the market in the sense that the report/summary identifies that the Appellant’s competitors had undertaken similar restructuring over the period commencing in 1996. The asserted aim for the Appellant was therefore to regain the edge lost to those competitors who, it appeared, had satisfactorily managed to achieve a labour cost reduction by the elimination of the 2ary C1 NICs charge otherwise due in respect of the workforce delivering services to offshore installation operators. The restructuring was to be carried out with minimum disruption to customers, commercial operations and employees. Deloitte noted that circa 700 employees employed by the Appellant were, pursuant to the restructuring, to be transferred to OSI. Notice of the transfer was given on 8 May 2004. With effect from 1 June 2004 it was proposed that such employees, together with the other necessary facilities to meet the Appellant’s contractual obligations to the Operators, would be subcontracted back to the Appellant by OSI thereby ensuring that OSI was able to provide a complete subcontracted service and not simply the provision of staff.

We were provided with four contracts with Operators. Such contracts take two principal forms: those which incorporate, subject to specific amendments, the LOGIC Standard Contract for the UK Offshore Oil and Gas Industry and those that reflect the LOGIC terms. The parties agreed that a contract signed between the Appellant and CNR International (U.K.) Limited (CNR) on 11 October 2011 was representative of a contract incorporating the LOGIC terms and a contract made on 1 August 2011 between the Appellant and Nexen Petroleum U.K. Limited (Nexen) was representative of a contract reflecting the LOGIC terms. We therefore limit our consideration of Operator contracts to these two contracts.

Under the CNR/LOGIC terms the Appellant agreed to provide “all management, supervision, personnel, materials and equipment … plant, consumables, facilities and all other things whether of a temporary or permanent nature, so far as the necessity for provision of the same is specified in or reasonably inferred from the contract.”

The Appellant was required to comply with, and strictly adhere to, CNR’s instructions and directions on all matters related to the work undertaken pursuant to the contract as specified in the scope of work.

The scope of work precisely specifies a menu plan for the delivery of meals and snacks. By way of example the requirements for breakfast specify exactly what range of items shall be available; at lunch and dinner the Appellant must offer a minimum of four main dishes on a rotational basis including a vegetarian dish, jacket potatoes and fillings plus à la carte options to include a fish dish. Themed meals are required to be offered on a twice monthly basis with sample menus provided for such themed meals. All necessary raw materials are required to be procured by the Appellant in order to prepare and serve the catering requirements specified.

Similarly specific and particularised requirements are set out in the scope of work for the operation of the bond (akin to a tuck shop); housekeeping for living quarters, dining rooms, galley area, food stores, recreational rooms, offices, exercise rooms, corridors, stairs, bathrooms, toilets etc. with frequency and particulars of cleaning specified for each area; the same applies to laundry services including the provision of specific quality of laundry and its washing.

The contract also provides a timetable for replacement of light equipment (including cutlery, bakeware etc.).

In terms of personnel the Appellant was required to provide a combination of operational personnel in the form of the Core Crew and the Ad Hoc Crew. The qualifications for workers and training requirements are all particularised. Job descriptions for the unit/field manager (UM), chef team leader, food production supervisor, chef, baker, assistant chef, chief steward, and handyman are all provided.

The remuneration payable under the contract was calculated separately for onshore and offshore activities with the offshore activities reimbursed at a day rate which included: all costs of food, beverages, materials and provisions, including cleaning consumables required under the scope of work (as specified in the contract by way of a “shopping basket”) including delivery by the Appellant to CNR’s nominated on-shore delivery point; all costs associated with personnel, container costs, overhead and profit. The calculation of the separate components of the day rate were prescribed in the contract.

The shopping basket requirements were extremely detailed i.e. “boneless rump, first grade, steer, grass fed, EU country of origin at £4.26 per kg”, “Cheddar cheese, mature white at £2.51 per kg”. The brand of coffee was identified, with different selected brands for caffeinated and decaffeinated.

The personnel rates forming part of the day rates included salary, bonus, PAYE taxes, NICs and all other payroll related costs together with training costs, change-over crews etc. The contract provided:

“[the Appellant] will engage employees on a US payroll basis. If in the opinion of [the Appellant] (acting reasonably in discussion with [CNR] it is appropriate to move employees back to a UK payroll then this will have to trigger a re-negotiation of the labour rates as detailed within.”

For each specific installation, the number of crew were identified by reference to the number of persons on board (POB) i.e. for 0 - 40 persons on board the Ninian Northern Asset in the period 1 September 2010 to 31 August 2011 4.25 catering crew were required at a day rate of £61.89. However, the contract confirmed that the rates payable to the individual workers were set by reference to the COTA Agreement.

In accordance with the general terms of the contract:

As originally agreed, the list of approved subcontractors provided for the subcontracting of a range of service provision. Having considered the aspects of the service said to have been subcontracted all subcontractors appear to have been engaged in respect of offshore provision. OSI was not specified as a subcontractor in the contract when signed. However, we understand, by reference to redacted emails we were provided with (and as confirmed by AMT) CNR gave approval for the subcontract to OSI.

The contract included a schedule specifying the health and safety requirements to be complied with.

Performance under the contract was managed through detailed key performance indicators.

Similar specification was separately made by CNR in respect of operations for which the Appellant was engaged relating to onshore facilities operated by CNR. We were not concerned with these operations and have not considered the terms of the contract in this regard.

The Nexen contract provided broadly similarly terms to the CNR contract with the consequence that we do not provide the same level of narration on the contract. However, we note:

On 1 June 2005, the Appellant and OSI entered the Intercompany Agreement effective from 8 October 2004. We were provided with two amendments to the Intercompany Agreement. The first updated the Operator list and the second amended the agreement in order to provide the Appellant with greater authority to deal with HR and personnel issues. The relevant terms of the Intercompany Agreement were:

We were provided with a single invoice number 179 issued on 25 November 2011 issued under the Intercompany Agreement. The invoice stated it was for a “composite charge for period 2 2012 in line with subcontract agreement dated 1 June 2005” and was in the sum of £3,563,065.08 plus VAT. Attached to the invoice was a list of personnel costs by employee reference and including pay code and a description of the charge for period 1 there were 92 employee numbers listed. We could not decipher the majority of charges but certainly, salary, overtime and travel were included and appeared to be for a group of employees but not for an individual Offshore Installation or even a single Operator contract. No food or consumable invoices were particularised as costs forming part of that invoice.

We were not provided with accounts for OSI, although we were provided with the corporation tax computations for accounting period ended 27 September 2013. These showed purchases and overheads of £17,089,212 and wages and salaries of £26,964,318 for that year.

The version of the Company Operating and Procedures Manual (Operations Manual) made available to us was that from 2013. We were not led to believe there had been any material changes to it in the period in which OSI was appointed under the Intercompany Agreement and we therefore assume that to be the case.

The purpose of the manual was stated to be to provide guidance on the way in which the Appellant and OSI (including personnel of those companies) would operate in relation to the supply of managed offshore services and administrative assistance under the Intercompany Agreement. It was stated to be an administration guide “not normally made available to employees generally”. The documents included sections on:

We were also provided with copies of the Aramark Offshore Operations Manual (AOOM). We understand that the AOOM applied to all Offshore Installations and not only to those whose personnel were employed by OSI. Certainly, no reference is made to OSI within the AOOM. It is a document whose “owner” was an Operations Manager (OM), a role we understand to be an on-shore role, with the incumbent of the role being an employee of the Appellant.

The AOOM run to over 100 pages and is very detailed in scope covering: accommodation management, bond management; client and customer relations, contract performance review, financial management, food production management, heli admin services, logistics, managing people, offshore payroll procedures, offshore waste management procedures, purchasing, sub-contractor management, mobilising/de-mobilising a contract, Sarbanes Oxley, compliance, audit and control, live food and bond, emergency response and container management.

We note that the document viewed as a whole sought to provide a comprehensive framework providing the delineation and responsibilities between onshore and offshore personnel. For those Operator contracts where the Appellant employed both onshore and offshore staff the delineation represents only a matter of effective service delivery. However, and for present purposes, the parties each relied on the minutiae of the division each seeking to show where control and/or day-to-day direction lay in order to determine the issue in this appeal. The offshore responsibilities under the AOOM lie with the unit manager (UM) who is defined as the “Aramark Manager who is responsible for running the Contract on Aramark’s behalf” (with Contract defined as the legally binding document between Aramark and [the Operator] which defines the scope of service and performance levels).

As this document remains a live document governing how onshore and offshore employees work together, we use the present tense:

We were provided with quarterly reports prepared by the Appellant and provided to OSI for quarters ended 30 June 2011 and 30 September 2011.

The reports each contain some general information, which was identical in each, setting out key points concerning contracts of employment, recruitment, disciplinary procedures, redundancy, and grievance procedures. These key points delineate responsibility between the Appellant and OSI broadly reflecting the Operations Manual. They provide that a nominated director be involved in any significant HR action concerning Senior Staff. In the case of recruitment the notes also state that approval would be sought from OSI (the same is not stated to be the case for redundancy, disciplinary or grievance). All procedures concerning Senior Staff leading to any decision were managed by the Appellant “as delegated” by OSI. For graded staff HR decision making was entirely in the hands of the Appellant and reported to OSI on a quarterly basis.

The reports then provide a list of new starters, disciplinaries/dismissals, grievances, and redundancy. We note that, included within the grievance information, was a collective grievance regarding the Icelandic ash cloud, which must have been ongoing as the eruption occurred in April 2010. Data was provided on employee training given.

Also provided within the report is profit and loss and other financial information as envisaged in the Operations Manual.

We were provided with a copy of an agreement between the Appellant, OSI and Strachans Limited dated 22 June 2012. It is a tripartite supply agreement pursuant to which Strachans was appointed by both the Appellant and OSI (who throughout the agreement were, together, referred to simply as Aramark) as the preferred provider of food, cleaning products and disposables, equipment, uniforms and textiles and products for the bond in respect of Offshore Installations where such installations are “Participating Locations”. We understand that all the food, consumables etc. provided to the Offshore Installations with which we are concerned were supplied to OSI by Strachans and then supplied by OSI under the terms of the Intercompany Agreement despite the provisions of clause 11.3 of the Intercompany Agreement but reflecting the provisions of the Operations Manual. Under the agreement between Strachans and OSI the price of food and consumables needed to meet the terms of the Operator contracts was provided by reference to a formula that included the cost of the goods and an agreed markup by reference to category of goods and the costs of distribution.

Under clause 3 of the Strachan’s agreement participating locations would place orders in writing or through the online ordering system operated by the Appellant. We assume the use of that system was made available to OSI by the Appellant pursuant to clause 11.3 of the Intercompany Agreement. The orders were then processed by Strachans for delivery to the nominated delivery point for loading on to vessels and transported to the Offshore Installation (as per the Operator contracts the Appellant was responsible for delivery to the nominated delivery point from which the Operator then took responsibility for transportation to the Offshore Installation).

The invoices available to us in the bundle from Strachans were made out toOSI c/o the Appellant. We assume that, as OSI did not have a UK bank account, all the invoices issued by Strachans were paid by the Appellant. As indicated above, we saw no recharges by OSI to the Appellant in respect of food or cleaning consumables.

We understand that the employment of Ad Hoc Crew was not transferred until 6 April 2006. We were provided with the standard letter dated 16 March 2006. We were also provided with FAQ’s and, so far as relevant these FAQs provided:

“What happens if I am put on a platform where the client has not agreed to the transfer to [OSI].

Any such location will still be contracted to [the Appellant] and accordingly, you will be seconded to [the Appellant] for the duration of that period. This will be processed automatically by our Payroll function and will neither have any impact on your terms and conditions nor require any active input from yourself. (original emphasis)

We understand that the template contract attached to the Intercompany Agreement was used in respect of the Core Crew of the Appellant listed in schedule 2 to the Intercompany Agreement and for employees subsequently recruited to work on the Offshore Installations in respect of which OSI was engaged as subcontractor. This was not however, all employees working on Offshore Installations. As confirmed by AMT there were Operators which did not give their consent to the Appellant subcontracting to OSI. The Core Crew working on those Offshore Installations continued to be employed or were employed upon recruitment by the Appellant. We were not provided with example or template contracts for employees of the Appellant performing similar or identical roles as those employed by OSI but assume that the terms and conditions were the same and only the name of the employer was different.

The template agreement and those we saw for a number of employees provided that the employer was OSI and stated that they met the requirements for a statement of applicable terms as required by section 1 Employment Rights Act 1996. Place of work was stated to be on offshore installations as allocated to the employee on the UKCS or any other reasonable location. The contract incorporates the COTA. The agreements we saw were signed for and on behalf of OSI by an OM or a senior OM, i.e. an employee of the Appellant.

We were also shown examples of disciplinary materials. The letters are on OSI headed paper and are signed for and on behalf of OSI by an employee of the Appellant. Invitations to disciplinary procedures name the person inviting as an employee of the Appellant and interviews were conducted on shore at the Appellant’s offices. The narrative of a letter communicating the outcome of a disciplinary takes account of the comments and views of both the UM and the OM. The letter is signed for and on behalf of OSI by an employee of the Appellant.

Copies of new employee assessment sheets were provided to us, completed by the UM. These had only space for signature by the employee and the UM. Staff appraisal forms provided for space for comments from the UM (as appraising manager) against specific competencies and general comments with space for signature by a senior manager (though often on those we saw there was no senior manager’s signature).

There was a copy of the employee handbook in the bundle. We note that it does not appear to be an OSI handbook but one generic to all employees either of the Appellant or OSI working offshore or on remote sites. The handbook covers the topics we would expect to find in any employee handbook. Section B4 concerns reporting for duty which requires those living more than 26 miles from the departure point to travel to the point of departure the day before a shift begins. The Handbook provides that where there is a failure to report on time it is “assumed [that the individual] has terminated [their] employment voluntarily without notice or reason]. An employee who does not contact the HR department within a 24-hour period, prior to or immediately after the crew change and can provide an explanation for [their] absence, may receive a disciplinary warning in the form of a final written warning.”. Similarly, there is an obligation (B13) to hold and carry a valid passport and failure to do so is also a disciplinary matter. Similar stringent requirements are imposed regarding certifications and health and safety compliance.

We found AMT to be an honest and competent witness and we broadly accept his evidence. There were some minor matters on which AMT’s evidence was not entirely clear but we did not consider them material to the decision we have to take.

AMT has been an employee of the Appellant since 2006 at various levels in the business and within various departments/divisions. His predominant responsibilities throughout his period of employment have been associated with the UKCS and Offshore Installations though at various points he has also had other responsibilities.

AMT explained:

DJV had three periods of employment with the Appellant from January 2005 – 6, January 2007 – December 2010 and February 2019 – shortly prior to the hearing. She thereby worked for the Appellant only during the initial period during which the arrangements were in operation. We did not find her evidence to be particularly relevant to the issue before us but summarise what we consider to be relevant.

We found DNL to be an honest straightforward witness who wanted to be helpful and, at times, gave overly long answers and explanations to his own perception of the question asked rather than answering the question put to him. His evidence did not always corroborate that given by AMT and DJV. We accept that his evidence represents his perspective and may or may not reflect the experience or perspective of other UMs. We do not consider it appropriate to marginalise his evidence where it conflicts with that of AMT or DJV as we consider that their evidence, which may represent the general approach of the Appellant, provides an onshore perspective of what was intended to happen at a corporate level; DNL’s is particular to his experience offshore.

DNL was openly agnostic to any forensic reflection on who employed him in a contractual sense – he worked for Aramark. He did not consider who he worked for significantly impacted how he performed his role which he considered to be to autonomously run the unit for which he was responsible and to provide the quality of service expected by the OIM on site. He had never had any contact or communication with management of OSI in the US. He had no concerns that he was working for a US based employer.

During his career with the Aramark group of companies DNL exclusively worked offshore. He was initially employed by OSI in 2005, following a speculative application, as a chef on Beryl Alpha as part of their Ad Hoc Crew. He was comparatively swiftly promoted to chef team leader on the Murchison installation where he worked until 2013. In that capacity he was the most senior OSI employee on the installation but worked to a field manager who was responsible for a number of installations. The field manager was the UM for present purposes. He gained relevant experience and in 2013 was promoted to work as a chef manager moving to the Dunbar installation. As chef manager he was the UM for that installation. The move to Dunbar was facilitated by the Appellant having been appointed to the contract in place of the previous incumbent. The remainder of the Core Crew who had serviced Dunbar prior to the Appellant winning the contract were TUPE’d to OSI.

DNL considered himself to be responsible for the service delivered by OSI on Dunbar. On a day-to-day basis his activities were guided/directed by: (1) a thorough and complete understanding of the scope of works specified in the Operator Contract between Total E&P Services Ltd and the Appellant, (2) the AOOM; (3) engagement and discussion with the OIM and (4) his own experience, knowledge and skill on how to deliver a high-quality operation offshore. A particular emphasis was placed on (3) and (4) with (4) having been enabled by a deep working knowledge of (1) and (2). The AOOM was described as DNL’s bible. He described his job as keeping the Operator happy.

It was accepted that DNL’s main onshore contact was an OM employed by the Appellant. DNL described his interaction and relationship with the OM as principally a channel of information pursuant to which information relevant to the performance of the contract was communicated to the OM whose responsibility it was to manage overall contractual compliance as distinct from detailed delivery. In the initial period of his role as a UM direct communications with the OM or other onshore staff were limited, often limited to an update or courtesy weekly call. Improved technology has increased the frequency of communication and more multi-participant teams/zoom meetings are held offering an opportunity to report on a more real-time basis, but the substance of the autonomous authority remained. However, he accepted, though he could not recollect a situation in which it had arisen, that he was accountable to the OM for the decisions he took and if those decisions resulted in an issue raised by the OIM it would be a matter in which the OM would become involved.

DNL gave a detailed description of his duties on shift. Shortly prior to the shift beginning there would be a handover from the UM running the previous shift. He would arrive on shift by helicopter. His contracted working hours on shift were 07:00 – 19:30 but as the UM he was effectively on duty or on call for the full two-week shift. During each shift he autonomously ran the service taking the relevant decisions on a daily basis to ensure high quality delivery. Daily crew meetings were his primary means of communication with the operating crew (which would include both Core and Ad Hoc Crew members). At that meeting the basic tasks for each day would be communicated, in accordance with the scope of works and agreed delivery routine as set out in the AOOM/ASSAM the latter adapted as appropriate by DNL so as to accommodate the particular requirements of the Dunbar installation. The crew would be supervised to ensure delivery as delegated. Each day would also involve interaction and engagement with the OIM particularly if there were any out of the ordinary or additional requirements or anticipated changes (e.g. in POB). The Crew would take instruction only from DNL subject to a caveat that a direct request to a Crew member from the OIM, if in accordance with an ASSAMs, would be followed and reported back to DNL.

DNL’s tasks also involved meal planning, food ordering following the procedures laid down in the AOOM, and admin (including wages sheets, processing invoices, hygiene inspections, delivery of onsite staff training, paperwork etc.)

Meal planning must meet the prescriptive terms of the scope of works and the budget set in the Operator Contract and cascaded to OSI through the Intercompany Agreement. Where the OIM requests out of budget provision and the OIM agrees to meet any associated additional cost there is no requirement to seek permission from the operations team, but DNL would usually report the position for information purposes. Interaction with operations is required where there is a mismatch between the scope of works and the budget – as had been recently experienced with food price inflation. In this scenario operations was able to provide advice on cost cutting.

DNL considered food ordering to be undertaken by him autonomously with no effective control or input from the operations team. Assessment of food spoiled, particularly on arrival, is a decision taken between the UM and the Operator’s medic on site. Where a decision is taken to destroy food operations are informed but permission to destroy is not sought.

The management of staff on installation is a key part of DNL’s role. He confirmed that the number of staff on the installation is determined by POB and thereby by the OIM and that it was not his role to resource appropriately skilled crew members. He stated that he was not involved in the recruitment of staff and accepted the team allocated to him by logistics; though he noted that there was little churn in staff, particularly on Dunbar because of the favourable shift patterns and the comparatively high budget for service provision. However, once on his unit and under his management, the performance and wellbeing of staff were considered to be his responsibility; he described them as his family. DNL saw part of his role as to develop the crew. He gave an example of an ambitious steward who he assisted and nurtured and who qualified as a chef.

When illness on installation occurred, he would be informed but the immediate point of contact for the crew member was the on-installation medic who would take them off shift or refer them to an Appellant-appointed onshore doctor who would determine if evacuation was required. For injuries to his Crew DNL would be the first to know and the appropriate management and reporting procedures provided for in the AOOM and ASSAMs would need to be followed by him; though such incidents were, in his experience, rare.

All Crew on his shift are line managed by DNL. As a consequence, he is responsible for managing performance and dealing with any underperformance in accordance with the AOOM. In the main his experience was that individuals had the appropriate skills and did their jobs adequately and this was generally managed through daily interaction and the annual appraisal process. He completed the appraisal forms and submitted them to operations/the HR department then “let the process take care of itself”. He gave a single example where apparent under-performance needed to be managed and that was done through conversations with DNL and a note on his appraisal form.

By these series of narratives DNL confirmed that he followed the procedures set out in the AOOM in terms of the decisions he took himself and where and when he reported data and information up to operations.

He had only on one occasion in his career within the Aramark group of companies had to deal with a disciplinary issue and it was not strictly performance-related but concerned use of social media. On that occasion DNL and the OIM had determined to remove the individuals from the installation and advice was sought from operations who DNL then understood sought input from the HR department. Given his limited experience in this regard DNL was not able to assist further with disciplinary or grievance procedures from his own experience. He indicated that had matters arisen with which he did not feel comfortable dealing with he would follow the AOOM and seek advice from operations/the HR department.

The Appellant submits that on the evidence it has proven that it is OSI and not the Appellant which exercised control and management over the most significant aspects of the OSI employees working on Offshore Installations. For the graded staff this is exercised through the UM and by way of autonomy of operation by the UM. The Appellant points out that it is no part of HMRC’s case that the Operators are liable as host employers and yet if the effective day-to-day exercise of control is not carried out by the UM the next most suitable candidate would be the OIM.

The following findings or inferences relevant to our decision were invited by the Appellant:

HMRC invited us to contextualise the witness evidence by reference to the documentary evidence and, in the case of any difference, to rely on the documents (as per the guidance exhorted in Gestmin SGPS S.A. v Credit Suisse (UK) Limited and another [2013] EWHC 3560 (Comm)).

By reference to the documentary evidence and their primary case HMRC contended that it was plain that the OSI employees were made available to the Appellant. Each individual was contracted to provide personal service to OSI and, pursuant to the terms of the Intercompany Agreement that personal service was made available to the Appellant and rendered for the purposes of the Appellant’s business. The working experience was said to be the same for Crew employed by OSI and Crew which continued to be employed by the Appellant. HMRC highlighted that for Ad Hoc Crew workers could be seconded one shift and subcontracted a second shift (depending on the Offshore Installation on which they were working) and they would have no different experience at all. It was, in HMRC’s submission this ubiquitous experience which demonstrated that the personal service was made available and rendered.

If, as we have found, the question of control were relevant HMRC contended:

We have considered all of the evidence before us. We have not found it necessary, as invited by HMRC, to focus on the documentary evidence in preference to the evidence of the witnesses. We found their evidence to be substantively consistent with the documents.

Having carefully considered all of the evidence we make the following findings of fact (in addition to those agreed between the parties) relevant to our decision and/or those which may be relevant to the Upper Tribunal should our decision on the law be incorrect:

On the evidence made available and by reference to the invoicing we have seen we can only conclude that there was a supply of staff and that the personal service of such staff was made available to the Appellant and rendered for the purposes of the Appellant’s business.

On the basis of our finding in respect of the day-to-day control exercised by the Appellant over OSI’s employees and for the reasons identified in paragraph 78 above we consider that the Intercompany Agreement does not constitute a commercial subcontracting relationship between OSI and the Appellant. OSI’s employees were, for these purposes “seconded” to the Appellant. OSI also supplied food and consumables but that does not convert the secondment into a commercially subcontracted service.

We have reached our conclusions without particular reference to the factual analysis in Bilfinger though note that we have essentially reached the same conclusion.

On the basis that it is accepted that the Appellant meets the definition within the HEP of a host employer and OSI of a foreign employer, in order to succeed in this appeal it was necessary for the Appellant to show that OSI was not only the contractual employer of the offshore Crew but that on a day-to-day basis it was OSI that exercised control of the operation/delivery of the offshore Crew individually or collectively.

On the facts as we have found them, and by reference to the legal test that we consider it appropriate to apply, we consider that whilst not a sham OSI was little more than a contractual shell. There was a management team in place which was sufficient to take the decisions required of OSI under the Intercompany Agreement as specified in the Operations Manual. But those decisions were limited to formal HR/contractual and certain financial decisions taken on the basis of recommendations made by the Appellant.

We consider that OSI did not exercise any effective or substantive day-to-day control over the Crew. In particular OSI did not direct or supervise how the personal service of the individual Crew members was performed. Whilst the graded Crew reported to the UM, the UM directed them precisely in the performance of their duties by reference to “step by step procedure[s], controls … and … basic standards” to be applied and achieved in accordance with the Appellant’s AOOM.

In our view, it was the Appellant that exercised the substantive day-to-day control of the Crew with the consequence that the personal service of the Crew including the UM was made available to the Appellant and rendered for the purposes of the Appellant’s business.

We therefore dismiss the appeal for the reasons stated above.

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.