Key Facts
- •Marathon Oil UK Ltd contracted Bilfinger UK Ltd to provide services on its North Sea oil platforms.
- •To avoid Employer National Insurance Contributions (NICs), Bilfinger UK Ltd established a wholly-owned Guernsey subsidiary, Bilfinger Guernsey Ltd, to employ the core team.
- •The core team employees were transferred to Bilfinger Guernsey Ltd from 1 January 2009 to 1 April 2014.
- •The dispute centered on whether Bilfinger UK Ltd was liable for secondary Class 1 NICs under the 'host employer' provisions of the Social Security (Categorisation of Earners) Regulations 1978.
- •Bilfinger Guernsey Ltd had contracts with Bilfinger UK Ltd for labour, scaffold, equipment, and HR services. Voyonic Crewing Ltd handled payroll and administration for Bilfinger Guernsey Ltd.
Legal Principles
Class 1 national insurance contributions are payable on earnings from employed earner’s employment.
Social Security (Contributions and Benefits) Act 1992 (SSCB92), section 6
The secondary contributor for an earner employed under a contract of service is their employer.
SSCB92, section 7(1)(a)
A territorial limit exists for liability to pay Class 1 contributions; individuals must be gainfully employed in Great Britain, and prescribed conditions as to residence or presence must be fulfilled.
SSCB92, section 1(6)
The Social Security (Categorisation of Earners) Regulations 1978 (SSR78) extend the definition of secondary contributor for specified employments, including the 'host employer' provisions.
SSR78, regulation 5
Paragraph 9 of Schedule 3, SSR78 defines when a host employer is liable for secondary NICs in relation to employment by a foreign employer.
SSR78, Schedule 3, paragraph 9
The meaning of 'personal service' is consistent with employment law case law, referring to the obligation of the employee to work personally.
Ready Mixed Concrete (South East) Limited v Minister of Work and Pensions [1968] 2 QB 497
Outcomes
The appeal was dismissed.
The Tribunal found that the personal service of the employees was 'made available' and 'rendered' to Bilfinger UK for the purposes of its business, satisfying the conditions of paragraph 9 of Schedule 3, SSR78. The structure, while designed to avoid NICs, did not preclude the application of the host employer provisions. The Tribunal rejected Bilfinger UK's argument that the host employer must have 'control' in the employment law sense.