Dog Handling agency bites off more than it can chew!
Kye Burchmore is the author of Bloomsbury Professional's Off Payroll Tax Handbook.
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A big win for HMRC in their pursuit of challenging employment status was seen in the case of Tyler Security Ltd v HMRC [2025] UKFTT 1250.
The tax at stake was only £88k, but the result was significant for HMRC because of the nature of the case and the content of the judgment handed down by the tribunal. This case will have wide ramifications and give HMRC the teeth to back up its bark.
During the appeal period the company provided dog handling security services at venues such as Wembley, Wimbledon, Fulham, Chelsea and Tottenham FC.
An interesting aspect of this case it that it is quite likely that Tyler Security were comfortable with dog handlers being self-employed because of the significant investment they put into the dogs and the training whereby they have a strong case for being in business on their own account.
What would have caught the company off-guard however is that HMRC did not argue the dog handlers were “employees” in the normal way, instead they argued that the company was an agency, supplying workers and therefore liable to account for PAYE and NIC under section 44 of the Income Tax (Earnings and Pensions) Act 2003 (irrespective of whether they may have otherwise been self-employed).
How can this be?
S44 ITEPA essentially says if a worker provides services to a client but contracts through an “agency”, PAYE and NICs will need to be applied unless it can be shown that there is no supervision, direction and control (including the right of) over the manner in which the services are provided. In this case, HMRC deemed the security company to be an agency.
Can a company providing dog handlers and dogs really be deemed an agency?
When you think of an agency, you think of a business supplying people. Not a business where it also includes the provision of equipment, plant, or in this case: dog handlers and their dogs.
This case demonstrates how far reaching the agency legislation can be, as this tribunal make it clear that providing equipment or plant does not negate the agency legislation from applying.
Tyler Security did raise the argument that the company was making a composite supply of dog detection services, not providing personal service of workers.
The tribunal’s view differed and they agreed with HMRC, finding “considerable force in Mr Stone’s (for HMRC) submission that the appellant is incorrectly focussing on the service that it provides to its end-clients rather than whether personal service was provided irrespective of whether equipment was provided at the same time.
Missed opportunity?
From reading the judgement, the legal defence seemed to unnecessarily focus on the element of “personal service” and employment status cases that had no bearing on the case. The judge even commented that it was pertinent to note that the barrister in his closing submissions relied on an old version of the agency legislation, not the current version which was amended as long ago as 2014. The result of this appears to be a disproportionate emphasis on personal service and whether the contract was an “agency contract”. This unusual approach can be seen in the submissions as set out in the judgement.
There appears to have been an oversight of an even more basic argument which should have been advanced. This being that Tyler Security were the “client” to the dog handler and there was no “agency” at all, and therefore the agency legislation never comes into question. This line of argument was flirted with when stating the company provided a service rather than people, but it does not appear to have been further developed. Furthermore, it was accepted by all parties that the services were provided under a contract between the “appellant and the end client” which could have been disputed and argued that the serviced provided by the dog handler, were under a contract only between the dog handler and the security company.
Whilst Tyler Security naturally has clients, this does not mean Tyler Security were, by default, an agency. There were many factors to support a finding that Tyler Security were the client for the purposes of the dog-handlers:
- Tyler Security was required to ensure compliance and enforcement with all applicable laws when the services were provided, including regulations, orders, directions and codes of practice.
- The security company had its own disciplinary procedure and would investigate any issues with the services provided.
- The company provided 2 months’ initial training and periodic training thereafter.
- If there were an insurance claim, it would be made against the security company. They would also provide a search adviser to some venues.
- They were ultimately responsible for the operatives and the services provided.
Whilst there is no direct correlation between the agency legislation and IR35, the IR35 provisions have provisions which help determine who is the client, and an entity cannot be a client for IR35 purposes if they fully contract out the work. A similar principle could have been advanced here.
HMRC would have some counter arguments against this line of argument as the venues did provide inductions, set out the type of services required and oversee the provision of services, but it would have been interesting to have explored this point in greater detail.
It was also a little surprising that the case of Gabriel Oziegbe v HMRC [2014] UKFTT 608 was not used by the defence. There are very few judgments relating to the agency legislation and the Oziegbe case also relates to security services (albeit it site security rather than dog handling) so could have proved helpful. Whilst the circumstances of the case are different, the tribunal in the Oziegbe case took a fairly soft approach to the requirement of supervision, direction and control as seen below:
“It is worth noting that the provision is most likely to be engaged when the agency workers fulfils a role in which it is natural and obvious that the client will exercise control”.
The tribunal then cited examples of agency workers working alongside employees of a client as a clear example. The tribunal in Oziegbe also noted:
“Such workers would go to the relevant sites, and would be shown by the site manager the relevant access points to the site, any areas of particular danger, and the types of security provision that the client was contracting to receive.
These were however deemed not to control “the manner” in which the services were provided. Compare this to the Tyler judgment where health and safety, best practice protocols, KPI’s, dress code, site inductions and briefings were deemed sufficient.
One last point to note is that the judge in Tyler Security held that the appellant being responsible for the operatives could have only been possible with an element of control. This is a bold and worrisome approach to adopt and would set an exceptionally low threshold for control because it is inevitable that when providing services to a client, a company will be responsible for the people undertaking work. This point seems to lose sight of the fact that the test is control “as to the manner” and not simply control over any aspect of the work.
This is a case that could fly under the radar for many, but its importance should not be underestimated as it will have a significant impact on how HMRC approach the agency legislation and who they try to pull within its net, which has just got much bigger.
Anyone advising on employment status, must also have a resolute understanding of the agency legislation and the tools available to HMRC.
