Tyler Security v HMRC: permission to appeal granted on dog handlers' expenses point

The Upper Tribunal has granted a security company permission to appeal on one narrow issue in a PAYE dispute over specialist dog handlers, while refusing every other ground advanced.

In Tyler Security Limited v HMRC [2026] UKUT 383 (TCC), Judge Baldwin allowed permission on a point he raised himself at an oral reconsideration hearing: whether the deductibility of handlers' dog-related costs should lead to a narrower reading of the requirement in section 44(1)(a) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) that an individual personally provides services.

Tyler supplied handlers and their search dogs to end clients, including sporting venues. HMRC issued a regulation 80 determination for 2017-18 on the basis that the agency legislation in sections 44 to 47 ITEPA applied, originally for £133,615.60 and reduced to £88,503.70 on review. The First-tier Tribunal (FTT) dismissed Tyler's appeal in October 2025.

Tyler argued that it supplied dog detection services rather than workers, since handler and dog were certified together as an indivisible unit. Judge Baldwin said section 44 does not ask what kind of service is supplied. Handlers were on site providing detection services, and interpreting the dog's reactions was an essential part of that work. Arguments based on VAT registration and on HMRC employment status certificates also failed: the income tax and VAT regimes are separate, and section 44 exists to bring into the employment tax regime people who are not already within it.

On supervision, direction or control under section 44(2)(a), Tyler's representative expressly did not challenge the FTT's findings of fact on an Edwards v Bairstow basis. Those findings included that Tyler would pick up departures from its procedures, that clients dictated the type and order of searches, and that client security managers observed how searches were done. Attendance at a set time and place, and uniform requirements, did not go to the manner of service, but many other features did.

The best judgement grounds were refused. The FTT had found the issue was never pleaded, despite HMRC correspondence inviting an amendment. Although HMRC bears the burden of proof, an appellant must flag the issue in its grounds or seek to amend them, the judge said, relying on Kingston Maurward College v HMRC [2023] UKUT 69 (TCC) and Fairford Group plc v HMRC [2014] UKUT 329 (TCC). He agreed that best judgement requires HMRC to consider all the material before it, but the point was not before the FTT.

The remaining grounds also failed. Section 45 deals with retainers and adds no condition to section 44 liability. Quantum was not in issue, and "remuneration receivable" could mean only the total paid to a contractor, excluding VAT. That contractors had accounted for their own tax did not discharge Tyler's PAYE obligations.

Permission was granted on a ground arising from the judge's concern that a self-employed handler with many section 44 engagements might end up in a materially worse tax position than a comparable self-employed individual or a full-time employee. Section 336 ITEPA is narrow, and costs such as food, training, veterinary care and insurance might not be deductible because they cannot be tied to a particular engagement. HMRC confirmed that home-to-work travel would generally not be deductible because of section 339A.

Post-hearing submissions did not allay that concern. The judge said a permission application is not the place to resolve it, but the unresolved questions might support restricting section 44 to arrangements that are little more than the provision of time, labour and effort. He found a reasonable prospect of success. Permission is confined to that issue and does not extend to the handlers' self-employed status or VAT position. The point was not fully explored before the FTT, although HMRC did not object to it as new.