Pracyva Ltd v The Commissioners for HMRC
[2024] UKFTT 32 (TC)
Prisma Recruitment Limited v The Commissioners for HMRC
14 March 2023
[2023] UKFTT 291 (TC)
First-tier Tribunal
A temp agency (Prisma) argued it shouldn't have paid taxes for its workers because they did special kinds of work. The court agreed and ordered a refund. However, the agency was still fined for paying its taxes late, because the court said it didn't have a good excuse for the late payment.
Key Facts
- •Prisma Recruitment Limited (Prisma) supplied workers to The BGM Group Limited (BGM) and its subsidiary, who in turn provided consultancy services to clients like RBS and Barclays.
- •The appeal concerns PAYE income tax, National Insurance Contributions (NICs), and VAT default surcharges for 2012/13.
- •BGM's financial difficulties led to unpaid invoices from BGM to Prisma, resulting in Prisma's financial distress.
- •Prisma initially paid the disputed tax and NICs under a time-to-pay agreement, while disputing liability.
- •Prisma argued the workers provided 'excluded services' under ITEPA 2003, meaning PAYE and NICs were not due.
- •The central dispute revolved around identifying Prisma's 'client' (BGM or RBS) under ITEPA 2003.
- •Prisma argued that its cash flow problems, stemming from the disputed tax payments and HMRC's delayed response, caused late VAT payments and provided a reasonable excuse.
Legal Principles
Agency workers' PAYE and NIC liability depends on whether they provide 'excluded services' under ITEPA 2003 and the identity of Prisma's 'client'.
Income Tax (Earnings and Pensions) Act 2003 (ITEPA)
A Regulation 80 determination is made if HMRC determines unpaid tax and notifies the employer; it doesn't require specific wording.
Income Tax PAYE Regulations 2003
An overpayment relief claim under Schedule 1AB TMA must be made within four years of the end of the tax year; the claim's form is not prescribed.
Taxes Management Act 1970 (TMA)
Insufficiency of funds is not a reasonable excuse for late VAT payment, but the underlying cause might be.
Value Added Tax Act 1994 (VATA)
Outcomes
Appeals regarding PAYE, NICs, and overpayment relief allowed.
Prisma's client was BGM; the workers provided 'excluded services'; Prisma's overpayment claim was valid and timely.
Appeal against VAT default surcharges dismissed.
Prisma's cash flow issues, while partly related to the PAYE/NIC dispute, were considered normal business risks; insufficiency of funds is not a reasonable excuse for late VAT payment.
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