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Big Bad Wolff v HMRC

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In Big Bad Wolff v HMRC [2017] UKFTT 729 (3 October 2017), the FTT found that although an actor had provided his services via a personal service company, this did not prevent him from being employed by his clients for NICs purposes.

Big Bad Wolff (BBW) was the personal service company of Mr Glenister and his wife. He was an actor and provided his services directly to clients. He was a director of BBW and received employment income and dividends in respect of his acting services.

The issue was the correct statutory construction of Social Security Contributions and Benefits Act (SSCBA) 1992 s 4A and the Intermediaries Regulations, SI 2000/727, reg 6, and the application of the Social Security (Categorisation of Earners) Regulations, SI 1978/1689.

The FTT observed that the clear intention of Parliament in enacting s 4A had been to prevent the avoidance of NICs by the introduction of intermediary or personal service companies. Prior to the introduction of s 4A, a worker, who would otherwise be in employment, would avoid NICs by using an intermediary company to supply his services to the client. Mr Glenister would, as a matter of general law, be a self-employed actor. However, if he contracted directly with a client and was paid a salary (with the result that he was not within the Categorisation Regulations 1978 exclusion in Sch 1 Part 1 Column (B)), he would be treated as being in employed earner’s employment for NICs purposes. Therefore, although Mr Glenister would be a self-employed person as a matter of general law, he would be treated as being in employment by the Categorisation Regulations. This was therefore a case where someone who would otherwise be treated as being in employment had sought, by using an intermediary company, to reduce his liability to NICs. This was the type of mischief s 4A aimed to avoid.

Read the decision.

Why it matters: This appeal is a test case and there were a number of other appeals, particularly concerning actors, awaiting its outcome. Given the interaction between the provisions on intermediary companies (s 4A and reg 6) and the Categorisation of Earners Regulations, this case confirms that, in most cases, the use of a personal services company will not achieve a tax saving.