Judgment summary
Tyler Security Limited applied to the Upper Tribunal for permission to appeal a decision of the First-tier Tribunal (Tax Chamber), released on 16 October 2025 with neutral citation [2025] UKFTT 1250 (TC), which had dismissed its appeal against a Regulation 80 PAYE determination (paras 1-3).
The Upper Tribunal had already refused permission to appeal on the papers on 22 June 2026, and the Applicant sought an oral reconsideration under rule 22(4) and (5) of the Tribunal Procedure (Upper Tribunal) Rules 2008, which took place on 21 September 2026 (paras 7-8).
The Upper Tribunal refused permission on all six grounds as originally advanced, finding none disclosed an arguable error of law. However, during the hearing the Judge raised a new concern about the deductibility of contractors' dog-related expenses and its potential bearing on the proper construction of section 44(1)(a) ITEPA. The Tribunal found this point had a realistic prospect of success and granted permission to appeal on that single, narrow ground only (paras 52-54, 63-64).
Background
The Applicant appealed against a determination made under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 on 11 March 2022. The sum assessed was £133,615.60, reduced to £88,503.70 following review, and related to the 2017-18 tax year (para 2).
The basis of the Determination was that the agency legislation, sections 44 to 47 of the Income Tax (Earnings and Pensions) Act 2003, applied in respect of specialist dog-handlers (the contractors) supplied by the Applicant to its end-clients. HMRC estimated the Determination to the best of its judgment under regulation 80(2) of the PAYE Regulations (para 3).
The FTT heard the appeal in person on 15-17 July 2025 and dismissed it (paras 1, 3). The Applicant applied in time to the FTT for permission to appeal on 10 December 2025, which the FTT refused by decision dated 6 February 2026 (paras 4-5). The Applicant renewed its application to the Upper Tribunal in time on 5 March 2026, and the Upper Tribunal refused permission by decision notice dated 22 June 2026, issued 23 June 2026 (paras 6-7). The Applicant then applied for that refusal to be reconsidered at an oral hearing, held on 21 September 2026 (para 8).
Core dispute
The Applicant identified six grounds of appeal (para 10), which the Upper Tribunal grouped into three main issues (para 11): whether the contractors were personally providing services within section 44(1)(a) ITEPA; whether the contractors were subject to supervision, direction or control such that section 44(2)(a) excluded the agency legislation; and whether the FTT was right not to consider whether the Determination was made to best judgment under regulation 80(2) of the PAYE Regulations.
Further grounds concerned whether the contractors had a view to personally providing services within section 45(1)(a) ITEPA, whether remuneration including compensation for transport, training and welfare of search dogs fell within section 47(3) remuneration, whether HMRC's exercise of best judgment met a Wednesbury-type standard referable to Van Boeckel v Commissioners for Customs and Excise [1981] 2 ALL ER 505, and whether the Determination was excessive given unchallenged evidence that the contractors had properly accounted for their own taxes.
Court findings
On personal provision of services, the Upper Tribunal held that section 44(1)(a) simply asks whether an individual personally provides services to another person, and the nature of the services supplied is irrelevant provided they are not excluded services. The FTT's conclusion that the dog-handlers personally provided services, notwithstanding the role of their dogs, disclosed no error of law (paras 12-24).
On supervision, direction or control, the Upper Tribunal found the FTT's conclusion was justified by numerous largely unchallenged findings of fact, including that the Applicant would pick up failures by handlers to follow standard operating procedures or client protocols, that clients dictated the type of search and protocols, and that security managers observed how searches were performed (paras 25-31).
On best judgment, the Upper Tribunal held that this issue was not properly before the FTT because the Applicant's Grounds of Appeal did not raise it and the Applicant did not seek to amend its grounds despite being invited to do so, citing Kingston Maurward College v HMRC [2023] UKUT 00069 (TCC), Allpay Ltd v HMRC [2018] UKFTT 273 (TC) and Fairford Group plc v HMRC [2014] UKUT 329 (TCC) (paras 32-40, 55-57).
Ground 2, relating to section 45 ITEPA, disclosed no error of law because section 45 does not add a condition for liability under section 44 where services have already been provided (paras 41-42). Ground 3, concerning section 47(3) remuneration, disclosed no error because the FTT correctly confined itself to the sole issue of whether the agency legislation applied in principle, not quantum (paras 43-46). Ground 6 disclosed no error because the Applicant's own PAYE obligations remained undischarged regardless of the contractors' personal tax compliance (paras 58-62).
However, the Upper Tribunal raised, of its own motion during the hearing, a concern as to whether contractors' dog-related expenses (food, training, veterinary care, insurance) would be deductible under section 336 ITEPA, and whether this might point towards a narrower construction of section 44(1)(a), confined to arrangements amounting to little more than provision of an individual's time or labour. The Tribunal found the parties' submissions did not resolve this concern and concluded that a ground of appeal based on this point had a reasonable, more than fanciful, prospect of success (paras 47-54).
Outcome
The Upper Tribunal refused permission to appeal on all grounds originally advanced by the Applicant, finding none disclosed an arguably material error of law and no other compelling reason to grant permission existed (para 63).
The Upper Tribunal granted permission to appeal on a single new ground: that the FTT erred in law by failing to address the deductibility of contractors' expenses and its possible bearing on the construction of section 44(1)(a) ITEPA, and in consequence erred in deciding that the services provided by the contractors amounted to the personal provision of services within that provision. Permission was confined strictly to this narrow issue (paras 52-54, 64).
Major issues / areas of contention
- Whether the contractors personally provided services within section 44(1)(a) ITEPA, given the role of their search dogs
- Whether the contractors were subject to supervision, direction or control such that section 44(2)(a) excluded application of the agency legislation
- Whether section 45(1)(a) ITEPA imposed an additional condition for liability under section 44
- Whether remuneration including compensation for dog transport, training and welfare fell within section 47(3) remuneration
- Whether HMRC exercised best judgment under regulation 80(2) of the PAYE Regulations and whether that issue was properly before the FTT
- Whether the Determination was excessive in light of unchallenged evidence that contractors had already accounted for their own taxes
- Whether the FTT erred in law by failing to consider the deductibility of contractors' dog-related expenses under section 336 ITEPA and its effect on the proper construction of section 44(1)(a)