Background
Aramark provided catering and hospitality services on offshore installations in the North Sea. Under arrangements intended to eliminate Aramark’s liability for secondary Class 1 national insurance contributions, relevant workers were employed by a non-UK affiliate, Aramark US Offshore Services LLC (OSI), which supplied services to Aramark under an intercompany agreement. Because OSI lacked the required residence or presence in Great Britain, it was not itself liable for those contributions.
HMRC determined that the workers’ personal services had been “made available” to Aramark and rendered for the purposes of its business under paragraph 9 of Schedule 3 to the Social Security (Categorisation of Earners) Regulations 1978. It therefore assessed Aramark for £6,830,899, plus statutory interest, for the period from 6 August 2011 to 5 April 2014. The First-tier Tribunal upheld the assessment, finding that OSI was little more than a contractual shell and that Aramark exercised substantive day-to-day control over the workers. Aramark appealed.
The Court’s Holding
The Upper Tribunal dismissed the appeal. Following its earlier decision in Bilfinger Salamis UK Limited v HMRC, it held that the statutory expressions “made available” and “rendered for the purposes” of the host employer’s business do not require the host employer to direct or control the workers. It was not satisfied that Bilfinger was manifestly wrong and declined to depart from it. Although the First-tier Tribunal had incorrectly treated control as necessary, that legal error was immaterial because it had reached the correct result: the host-employer provision applied and Aramark was properly assessed.
The Tribunal also addressed Aramark’s alternative challenge in case its interpretation of the legislation was overturned on further appeal. It held that the First-tier Tribunal was reasonably entitled to find that Aramark exercised the relevant day-to-day control through the operational framework and offshore manual it created, despite the autonomy of OSI-employed unit managers. The First-tier Tribunal was likewise entitled to reject Aramark’s characterization of the arrangement as the purchase of a complete or composite catering and housekeeping service.
Key Takeaways
- The host-employer provision does not require the UK host to exercise direction or control over workers whose personal services are made available to it.
- An immaterial legal error by the First-tier Tribunal did not justify setting aside its decision where the statutory provision necessarily applied on the facts found.
- Even if control had been required, the evidence permitted the conclusion that Aramark controlled the workers through its operational framework and that OSI was not supplying an independent composite service.
Why It Matters
The decision confirms the Upper Tribunal’s Bilfinger interpretation of the foreign-employer rules and limits attempts to avoid secondary Class 1 contributions by placing workers with an overseas group employer. The statutory inquiry focuses on whether personal services were made available to the UK host and actually rendered for its business, rather than on whether the host exercised employment-like control.
The ruling also shows that labeling an intragroup arrangement a subcontract for comprehensive services will not determine its treatment. Tribunals may examine how the arrangement operated in practice, including who devised the operational framework, allocated personnel, and benefited from their work.