Aramark Limited v HMRC: Upper Tribunal upholds NICs assessment on offshore staffing scheme

The Upper Tribunal (Tax and Chancery Chamber) has dismissed an appeal by Aramark Limited against a First-tier Tribunal decision that an arrangement designed to eliminate secondary Class 1 national insurance contributions on its offshore catering workforce did not achieve its intended effect, in a judgement given by Mr Justice Richards and Judge Nicholas Aleksander.

Aramark provides catering and hospitality services to operators of offshore installations on the UK continental shelf. From 2004 it restructured its staffing arrangements so that employees previously used to service its contracts with operators were transferred to a US affiliate, Aramark US Offshore Services LLC, which had no UK residence or presence and so fell outside the territorial scope of secondary Class 1 NICs. Under an intercompany agreement, the US company then supplied services back to Aramark to enable it to meet its obligations to operators. HMRC assessed Aramark for approximately £6.8 million in respect of the period from August 2011 to April 2014, relying on the host employer provision in paragraph 9 of Schedule 3 to the Social Security (Categorisation of Earners) Regulations 1978, which shifts liability to a UK host where the personal service of a foreign employer's staff is "made available" to that host and rendered for its business.

The First-tier Tribunal had found for HMRC on the basis that the host employer provision required some degree of control by the host over the workers, and that Aramark, rather than its US affiliate, exercised that day-to-day control in substance, notwithstanding the formal management structure in place. That decision was reached without the benefit of the Upper Tribunal's more recent ruling in Bilfinger Salamis UK Limited v HMRC, which held, on similar facts, that neither "made available" nor "rendered" imports any requirement for control at all.

On appeal, HMRC's primary case shifted to rely on Bilfinger directly, arguing that the appeal should fail regardless of the control question. Aramark, represented by Sam Grodzinski KC, mounted a detailed challenge to Bilfinger's correctness, addressing the ordinary meaning of "made available", the significance of a 2014 legislative amendment introducing anti-avoidance provisions, the interpretative weight of the Explanatory Note to the 1994 amending regulations, an ejusdem generis argument based on the enabling power in section 7(2) of the Social Security Contributions and Benefits Act 1992, and the contrast between paragraph 9 and the differently worded paragraph 2 of the same Schedule.

Applying the established threshold for departing from a previous Upper Tribunal decision on a point of law, namely that the tribunal must be convinced or satisfied that the earlier decision was wrong, the tribunal rejected each of these arguments in turn and declined to depart from Bilfinger. That conclusion was sufficient to dispose of the appeal, since it was common ground between the parties that Aramark's case could not succeed if Bilfinger stood.

The tribunal went on, for completeness, to consider Aramark's alternative challenge to the First-tier Tribunal's factual finding that it had in any event exercised the necessary degree of control, applying the Edwards v Bairstow standard reserved for perversity-type challenges to evaluative findings. It found no flaw of the kind required to disturb that conclusion, holding that the arrangement, structured to leave the US company as what the First-tier Tribunal had described as a "contractual shell", supported the tribunal's assessment that Aramark retained real day-to-day control notwithstanding the formal division of responsibilities. The appeal was dismissed on both bases.