[2010] UKFTT 205 (TC)

TC00507
Appeal numbers : SC/3225/2008
		       TC/2009/10162

National Insurance contributions – liability of secondary contributor for Class 1 contributions – jurisdiction – whether the appellant was liable for secondary contributions as host employer of the employees – whether a third party was liable for those contributions as resident, present or having a place of business in the jurisdiction

FIRST-TIER TRIBUNAL
TAX CHAMBER

	GOLDMAN SACHS INTERNATIONAL	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (National Insurance Contributions)	Respondents

				TRIBUNAL: 	JUDGE DAVID WILLIAMS

	
Sitting in public in London on 17 and 18 December 2009

David Goldberg QC, instructed by Freshfields Bruckhaus Deringer, for the Appellants

Malcolm Gammie QC, instructed by the counsel General to HMRC, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1	This decision was directed by the Upper Tribunal on a preliminary issue. It arises in an appeal by Goldman Sachs International (“GSI”) against a notice of decision issued by the predecessor to the National Insurance Contributions Office (“NICO”) of the Respondents, Her Majesty’s Revenue and Customs (“HMRC”, which includes predecessors in title). It arises out of litigation involving appeals by GSI and an associated company, Goldman Sachs Services Ltd (“GSSL”), against decisions and determinations made by HMRC and other litigation commenced by HMRC. Following the direction of the Upper Tribunal, the appeal by GSSL is no longer linked with this appeal. I do not discuss its appeal further. It is no longer a party to this appeal. It was not represented before me nor gave evidence to me.

2	I heard the preliminary issue over two days during which I heard the evidence of one witness for GSI and was given limited documentary evidence. It was agreed that counsel and the tribunal would not identify the names in these proceedings of individuals who were not parties to the hearing in court, and that the tribunal would redact any identifying details of individuals from the decision. In part for this reason, the tribunal indicated that it would issue a draft to both parties before issuing its full decision. A draft was issued, and the parties were invited to make any submissions they wished on three points: any requested redactions, any corrections, and any submissions on points of law that were not fully argued at the hearing (for example about statutory payments, the history of the regulations, and the Scottish aspect). Both parties suggested corrections, and I am grateful for those. Neither party requested any further redactions, although GSI made a linked application that I will deal with separately. GSI declined to make any further comment on issues of law. HMRC did so, but mainly by way of correction and clarification. 

3	The direction of the Upper Tribunal is:

“A preliminary hearing (the “Preliminary Hearing”) shall be held before the First-tier Tribunal (Tax Chamber) to determine whether Goldman Sachs International is the secondary contributor in respect of employees of Goldman Sachs Services Ltd for the purposes of sections 6(3) and 7 of the SSCBA by virtue of the application of regulation 5 and paragraph 9 of Schedule 3 to the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689).
 
The Upper Tribunal gave full directions for the Preliminary Hearing. I heard it in accordance with those directions which, I understand, were largely agreed in draft by the parties.

4	The direction directed the parties to endeavour to agree a statement of agreed facts. The parties were unable to do so. Indeed, I have to record that they agreed very little. I am therefore able to rely on little common ground between the parties as to the relevant facts save in so far as an issue was identified and not challenged in the hearing before me. However, I exercise caution on this. I am not hearing the full appeal. Issues that might have been agreed or challenged expressly on the basis of evidence presented in the full appeal are not so readily identified or supported in this preliminary hearing. I therefore did not take the view that the fact that a party had not produced evidence on something excluded the party from raising an objection about a point. The tribunal has broad rules about both its proceedings and about evidence and it must exercise them efficiently and effectively when dealing with a preliminary issue. 

5	The evidence before me came from two sources. The first consisted of two witness statements and oral evidence of an individual witness who was not working in the relevant area of the GS group at the times relevant to these appeals but became responsible for some of them after that time, together with an assemblage of documents. The second was correspondence between the parties to the main appeals.   

The appeals giving rise to the preliminary issue
6	The appeal of which this is a preliminary hearing is against two decisions made by HMRC under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999 (“TFA”). They were issued on 12 December 2002. All section 8 decisions about Class 1 National Insurance contributions (“N I contributions”) must name both the individual that NICO contends to be an employee in the relevant period and the person whom NICO contends to be the employer, unless it is contended that the employer is responsible for both primary and secondary Class 1 contributions. That was not contended here. Formally, this involves HMRC issuing a decision against every employee of an employer where NICO is of the view that there is a failure to pay Class 1 contributions on behalf of all or a significant part of the payroll of a major employer. Additionally, both the putative employee and the putative employer have separate rights of appeal against such a decision. So a challenge by NICO to the NI contribution returns for a major employer potentially involves issuing many individual decisions with two potential appellants against every notice.

7	To avoid this, HMRC followed the practice, approved and adopted by this tribunal in past appeals, of naming a few individuals as “specimen” employees, and notices are issued to those employees and to their employer. Two individuals were identified in the early stages of this litigation, and decisions were issued concerning both of them. 

8	One of the decisions reads:

“That Goldman Sachs International is liable to pay primary and secondary Class 1 contributions in respect of the earnings of [a named individual]. The amount that Goldman Sachs is liable to pay in respect of those earnings is £85,015.60. The amount that Goldman Sachs has paid in respect of those earnings is £4,313.60. The difference is due to Class 1 contributions on income in respect of the exercise of Unapproved Share Options:

1997/1998 	£ 131,000 at 10%
1998/1999       £ 143,000 at 10%
1999/2000       £ 191,000 at 12.2%”

The other decision names another individual (with a name further down the alphabetical order of the payroll) and gives other figures but is otherwise in exactly the same form as this decision.

9	Had this been a full hearing of the appeal, those individuals would have been entitled to appeal against the decision in their own right and they would have been entitled to express their views and to have given evidence to the tribunal. They would have been on record as appellants whether or not they chose to take an active part. No mention of the individuals was made in the directions for this hearing, and they have neither appeared before me nor given any evidence. I have, for example, not been shown that the decisions in question were served on the individuals so that they were aware of their rights of appeal. Nor am I aware of any indication by them, if they did receive notice, that they appealed against the decisions or acquiesced in them. I assume that they were given proper notice, and that these appeals are proceeding in good order. But that is an assumption, not a finding, and may need to be tested at a later stage. Nor do I take any point on the issue raised by Mr Gammie QC when he informed me that GSI had nominated the two individuals and not GSSL. If GSI was not the employer of either individual, on what basis did it nominate them for this appeal? That I also leave to the main hearing. I take another related point from Mr Goldberg QC, again without the point being tested. He submitted that on the unchallenged basis of the evidence of the witness “all people working in the UK for GS were employees of GSSL” and that the two individuals were working in the UK.  
I accept that, save for specific individuals identified in the papers.

10	Any response by an employee to a section 8 decision is directly relevant to this preliminary hearing. An indication that an employee she does not intend to appeal against the decision is clearly evidence in support of the decision, while an indication that the individual has appealed or intends to appeal against the decision is clearly evidence in support of an appeal by an employer or a person contended to be an employer. I do not have that evidence. It cannot be assumed that an employee will agree with the views of the employer about contribution issues and I do not assume that. However, I was given no more than minimal evidence about either of the individuals. I do not, for example, know whether they still work for GSI, GSSL or any associated company or whether they are now within the jurisdiction of this tribunal. And it may be that the secondary contributions on the specific earnings of these employees arise when there is no equivalent primary contribution, so that the employees would have no practical direct interest in the appeals. Nor do I know that the two individuals have been informed of this hearing. I therefore make this decision without making any finding of fact which may prejudice a decision for or against either of the individuals as appellants in any further hearing of the appeals. Nor do I name them in this decision for that reason. 

11	As I know little about, and make no further findings about, those individuals, I must make further assumptions. I assume, but do not find, that the status of the individuals does not raise any specific question about their own liability to primary Class 1 contributions. Such questions may affect the outcome of any appeal on the primary contribution issue and whether as a result there is any secondary contribution liability. For example, if the individual is personally not within the jurisdiction of the British NI contribution scheme, then there will be no secondary contribution liability. I therefore assume, but do not find, that the named individuals were at all relevant times within the jurisdiction of the NI scheme for Great Britain and that there were no reasons of age, gender, or otherwise that gave rise to specific personal considerations relevant to this decision. I also assume, as indicated at the hearing, that there is no relevant European Union point of relevance, nor any issue arising from any double social security agreement.  

12	I was told little about the “exercise of Unapproved Share Options” referred to in the decisions. As that is the main issue in the appeal, I make no findings about it. But I must make further working assumptions. I assume that the sums concerned are earnings of employed earners for current purposes. That is in dispute in the main appeal. I was not given evidence that any sums arising as earnings under these options were paid (if they were paid at all) to the named employees through the employer’s standard payroll. That is also important. I assume that the two individuals were the beneficiaries of the sums identified in the decisions by HMRC. I assume that the two individuals were paid monthly and that any payments for which they and their employer should have accounted, at least in the view of HMRC, were payable to them through the employer’s payroll as part of their monthly pay arrangements. However, I adopt that assumption with considerable caution. I do not know, for example, when or how the sums were paid, and in particular if they were paid direct to the employees or through one or more third parties. Were they paid in or after the year in which it is contended that they were earnings? Were they in the relevant periods or after those periods? When did any liability, if there was a liability, to pay the sums actually arise? I was given no evidence on those points. I therefore assume that the liability of the primary and secondary contributors arose by reference to monthly pay periods. I do so because there was clearly evidence of monthly pay cycles applying at any rate to most employees.   

The main arguments of the parties
13	HMRC contends that there is a liability to pay both primary and secondary Class 1 contributions in respect of the sums identified by description in the disputed decisions. HMRC issued decisions treating GSI as the secondary contributor in respect of the named employees, who are contended to be the primary contributors. In its initial decisions HMRC appears to have assumed without further analysis that GSI was the secondary contributor. GSI initially took no point on that. At a later stage GSI contended that GSSL was the secondary contributor. HMRC contested this on the ground that GSSL was not within the jurisdiction as a secondary contributor and that GSI, which was in the jurisdiction, was liable for the secondary contributions as host employer. GSI contended that GSSL was in the jurisdiction and so it, GSI, could not be host employer. 
14	At this point I must make a further reservation about the evidence before me. I do not know the precise relationship between GSI and GSSL. They are clearly both linked within the Goldman Sachs group or groups of companies in some way, but I have not been given evidence of the nature of that link. I assume that neither of these two bodies controls the other, but the evidence is that they are clearly closely linked in some other way. In the absence of any agreed facts or specific evidence, I assume that for the purpose of this decision that GSSL is a third party and that GSI and GSSL cannot be regarded as the alter ego or alternate personality of each other. 

15	I also accept as a basis for this decision, without making any finding, the understanding by HMRC of the employment arrangements involving the two nominated employees and similar employees. I quote from the skeleton argument of Mr Gammie QC (with inserted abbreviations and omissions):

“The Revenue’s current understanding of the GS employment arrangements is as follows: -

(a)	Throughout the relevant period GSSL formally employed (ie it was the group contractual employing company of) a number of individuals whom it seconded to work for other GS entities.
(b)	 In the 26-month period between 6 April 1997 and sometime around June or July 1999 (“the first period”) all the employees in respect of whom NI liabilities are said to arise in this case (including [the two named employees]) were contractually employed by GSSL.
(c)	Throughout the first period GSSL seconded all those employees to work for other GS entities and most of them (including [the two named employees]) were seconded for GSI in the UK.
(d)	In the 10 month period from sometime around June or July to 5 April 2000 (“the second period”) a number of the employees concerned (including[the two named employees]) were employed by and continued to work for GSI and were not employed by GSSL.”

16	The dispute as it is put to me for this preliminary decision is about whether GSI is the secondary contributor for current purposes. I assume that GSI is not “the employer” of the relevant employees for the first period in question. It was accepted by HMRC that GSSL is not registered either in England and Wales or in Scotland and is registered in the British Virgin Islands. It was not disputed by HMRC that GSSL was not resident in any part of the United Kingdom at any time relevant to these appeals. It was not disputed by GSI that it, GSI, was in the jurisdiction for those purposes. 

17	The dispute is about whether GSSL, as secondary contributor, was in the jurisdiction for current purposes while not being incorporated or resident here. If it was not, then the question is about whether GSI is, or is to be treated as, secondary contributor as it was in the jurisdiction. The parties put this to me as a matter of first impression on which there is no previous direct authority. It is therefore necessary to examine the legislative context of the test around which the argument revolves. 

This decision
18	It is perhaps surprising that so important a provision as the jurisdictional rule for secondary contributors of NI contributions has not previously been considered by any court or tribunal. And it is interesting that there has been no perceived need by the legislature to define the jurisdictional limits in regulation 119 and its predecessors further either in the original legislation in 1974 or at any time since 1974 to clarify or amend them. One might assume that the reason is that the rule is entirely clear and unambiguous. Unfortunately that is not so, as the arguments of the parties to this case show well. There is no “bright line” here. 

19	As this is a matter of first impression on a well established rule that is, nonetheless, inherently ambiguous in its language, I think it right to set out in more detail than usual the approach I take. The first step is to identify fully the legislative context of the rule and any conclusions I can draw from that context. I then examine the evidence before me and the arguments by analogy from other authority that the parties put before me, and seek to draw a clearer view of my answer to the question posed. I put it that way because a question of being present or presence must be a question both of fact and of law. If the evidence does not meet any of a range of tests, then I do not need to decide where the line is to be drawn. That is the difficulty of dealing with this question in this decision. It is heavily dependent on facts only some of which are in evidence and it is not a question that can be abstracted readily from its factual context.  

The relevant primary legislation
20	The relevant primary legislation is in the Social Security Contributions and Benefits Act 1992 (“the 1992 Act”). The relevant provisions in the Act (as amended for the tax year 1999-2000) are as follows:

“PART I
CONTRIBUTIONS
Preliminary

1.—(l) The funds required— 
(a) for paying such benefits under this Act as are payable out of the National Insurance Fund and not out of other public money; and
(b) for the making of payments under section 162 of the Administration Act towards the cost of the National Health Service,
shall be provided by means of contributions payable to the Inland Revenue by earners, employers and others, together with the additions under subsection (5) below and amounts payable under section 2 of the Social Security Act 1993.

(2) 	Contributions under this Part of this Act shall be of the following six classes—
(a) 	Class 1, earnings-related, payable under section 6 below, being—
(i) primary Class 1 contributions from employed earners; and
(ii) secondary Class 1 contributions from employers and other persons paying earnings;
...

(4) 	Schedule 1 to this Act—
(a) 	shall have effect with respect to the computation, collection and recovery of contributions of Classes 1, 1A, 1B, 2 and 3, and  otherwise with respect to contributions of those classes; and
(b) 	shall also, to the extent provided by regulations made under section 18 below, have effect with respect to the computation, collection and recovery of Class 4 contributions, and otherwise with respect to such contributions.
...

 (6) 	No person shall—
(a) 	be liable to pay Class 1, Class 1A, Class 1B or Class 2 contributions unless he fulfils prescribed conditions as to residence or presence in Great Britain;
(b) 	be entitled to pay Class 3 contributions unless he fulfils such conditions; or
(c) 	be entitled to pay Class 1, Class 1 A, Class 1B or Class 2 contributions other than those which he is liable to pay, except so far as he is permitted by regulations to pay them.
...

Categories of earners

2.—(1) In this Part of this Act and Parts II to V below— 
(a) 	"employed earner" means a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with emoluments chargeable to income tax under Schedule E ...
...

“Earnings” and “earner”

3.—( 1) In this Part of this Act and Parts II to V below— 
(a) 	"earnings" includes any remuneration or profit derived from an employment; and
(b) 	"earner" shall be construed accordingly.

(2) 	For the purposes of this Part of this Act and of Parts II to V below other than those of Schedule 8—
(a) 	the amount of a person's earnings for any period; or
(b) 	the amount of his earnings to be treated as comprised in any payment made to him or for his benefit,
shall be calculated or estimated in such manner and on such basis as may be prescribed.
...

(3) 	Regulations made for the purposes of subsection (2) above may prescribe that payments of a particular class or description made or falling to be made to or by a person shall, to such extent as may be prescribed, be disregarded or, as the case may be, be deducted from the amount of that person's earnings.
...

Payments treated as remuneration and earnings

4. -   ( 1) For the purposes of section 3 above there shall be treated as remuneration derived from employed earner's employment—
(a) 	any sum paid to or for the benefit of a person in satisfaction (whether in whole or in part) of any entitlement of that person to—
(i) statutory sick pay; or
(ii) statutory maternity pay; and
(b)	any sickness payment made—
(i) to or for the benefit of the employed earner; and
(ii) in accordance with arrangements under which the person who is the secondary contributor in relation to the employment concerned has made, or remains liable to make, payments towards the provision of that sickness payment.

(2) 	Where the funds for making sickness payments under arrangements of the kind mentioned in paragraph (b) of subsection (1) above are attributable in part to contributions to those funds made by the employed earner, regulations may make provision for disregarding, for the purposes of that subsection, the prescribed part of any sum paid as a result of the arrangements.

(3) 	For the purposes of subsections (1) and (2) above "sickness payment" means any payment made in respect of absence from work due to incapacity for work.

(4) 	For the purposes of section 3 above there shall be treated as remuneration derived from an employed earner's employment –
(a) 	any gain on which the earner is chargeable to tax by virtue of section 135 (gains by directors and employees from share options) of the Income and Corporation Taxes Act 1988 (“the 1988 Act”);
(b)	any sum paid (or treated as paid) to or for the benefit of an employed earner which is chargeable to tax by virtue of section 313 of the 1988 Act (taxation of consideration for certain restrictive undertakings).

(5) 	For the purposes of section 3 above regulations may make
provision for treating as remuneration derived from an employed earner's
employment any payment made by a body corporate to or for the benefit
of any of its directors where that payment would, when made, not be
earnings for the purposes of this Act.

(6)	For the purposes of section 3 above regulations may make provision for treating as remuneration derived from an employed earner’s employment any amount on which the earner is, by virtue of any provision of sections 140A to 140H of the 1988 Act, chargeable to income tax under Schedule E in respect of an acquisition of shares or an interest in shares.

(7)	Regulations under this section shall be made by the Treasury with the concurrence of the Secretary of State. 

...

Liability for Class 1 contributions

6.—( 1) Where in any tax week earnings are paid to or for the benefit of  an earner over the age of 16 in respect of any one employment of his which is employed earner's employment —
(a)	a primary Class 1 contribution shall be payable in accordance with this section and section 8 below if the amount paid exceeds the current lower earnings limit (or the prescribed equivalent in the case of earners paid otherwise than weekly); and 
(b)	a secondary Class 1 contribution shall be payable in accordance with this section and section 9 below if the amount paid exceeds the current earnings threshold (or the prescribed equivalent in the case of earners paid otherwise than weekly).

(2) 	Except as may be prescribed, no primary Class I contribution shall be payable in respect of earnings paid to or for the benefit of an employed earner after he attains pensionable age, but without prejudice to any liability to pay secondary Class 1 contributions in respect of any such earnings.

(2A)	No primary or secondary Class 1 contribution shall be payable in respect of earnings if a Class 1B contribution is payable in respect of them.”

(3) 	The primary and secondary Class 1 contributions referred to in subsection (1) above are payable as follows—
(a) 	the primary contribution shall be the liability of the earner; and
(b) 	the secondary contribution shall be the liability of the secondary contributor;
but nothing in this subsection shall prejudice the provisions of paragraph 3 of Schedule 1 to this Act relating to the manner in which the earner's liability falls to be discharged.

(4) Except as provided by this Act, the primary and secondary Class 1contributions in respect of earnings paid to or for the benefit of an earner in respect of any one employment of his shall be payable without regard to any other such payment of earnings in respect of any other employment of his.

(5) Regulations may provide for reducing primary or secondary Class 1 contributions which are payable in respect of persons to whom Part XI of the Employment Rights Act 1966 (redundancy payments) does not apply by virtue of section 199(2) or 209 of the Act.

(6) The power conferred by subsection (1) above to prescribe an equivalent of the lower earnings limit includes power to prescribe an amount which exceeds, by not more than £1.00, the amount which is the arithmetical equivalent of that limit.

(7)	Regulations under any provision of this section shall be made by the Treasury.

...

“Secondary contributor”

 7.—(l) For the purposes of this Act, the "secondary contributor" in relation to any payment of earnings to or for the benefit of an employed earner, is—
(a) 	in the case of an earner employed under a contract of service, his employer;
(b) 	in the case of an earner employed in an office with emoluments, either—
(i) such person as may be prescribed in relation to that office; or
(ii) if no person is prescribed, the government department, public authority or body of persons responsible for paying the emoluments of the office;
but this subsection is subject to subsection (2) below.

(2) 	In relation to employed earners who—
(a) 	are paid earnings in a tax week by more than one person in respect of different employments; or
(b)	work under the general control or management of a person other than their immediate employer,
and in relation to any other case for which it appears to the Treasury that such provision is needed, regulations may provide that the prescribed person is to be treated as the secondary contributor in respect of earnings paid to or for the benefit of an earner.

(3)	Regulations under any provision of this section shall be made by the Treasury.”

21	As this shows, a “secondary contributor” has two responsibilities under the 1992 Act with regard to any primary contributor (that is, any employee who is for these purposes an employed earner). It must pay and account for the employer’s Class 1 contributor for any earner. It must arrange for statutory payments to employees entitled to them.

22	 The second of those responsibilities is imposed by Part XI of the 1992 Act, providing for statutory sick pay, and the parts of the 1992 Act that follow and deal with statutory maternity pay and other statutory payments. Although neither party raised this second responsibility in argument before me, in my judgment it is relevant in establishing on the facts who is a secondary contributor for the purposes of section 6 of the 1992 Act. This is because of the definition of “secondary contributor” for the purposes of the statutory payments. The following provisions in sections 151 and 163 of the 1992 Act are relevant to this:

“Employer's liability

151.—(1) Where an employee has a day of incapacity for work in relation to his contract of service with an employer, that employer shall, if the conditions set out in sections 152 to 154 below are satisfied, be liable to make him, in accordance with the following provisions of this Part of this Act, a payment (to be known as "statutory sick pay") in respect of that day.

(2) 	Any agreement shall be void to the extent that it purports—
(a) 	to exclude, limit or otherwise modify any provision of this Part of this Act, or
(b) 	to require an employee to contribute (whether directly or indirectly) towards any costs incurred by his employer under this Part of this Act.

(3) 	For the avoidance of doubt, any agreement between an employer and an employee authorising any deductions from statutory sick pay which the employer is liable to pay to the employee in respect of any period shall not be void by virtue of subsection (2)(a) above if the employer—
(a) 	is authorised by that or another agreement to make the same deductions from any contractual remuneration which he is liable to pay in respect of the same period, or
(b) 	would be so authorised if he were liable to pay contractual remuneration in respect of that period.

(4) 	For the purposes of this Part of this Act a day shall not be treated as a day of incapacity for work in relation to any contract of service unless on that day the employee concerned is, or is deemed in accordance with regulations to be, incapable by reason of some specific disease or bodily or mental disablement of doing work which he can reasonably be expected to do under that contract.

(5) 	In any case where an employee has more than one contract of service with the same employer the provisions of this Part of this Act shall, except in such cases as may be prescribed and subject to the following provisions of this Part of this Act, have effect as if the employer were a different employer in relation to each contract of service.

(6) 	Circumstances may be prescribed in which, notwithstanding the provisions of subsections (1) to (5) above, the liability to make payments of statutory sick pay is to be a liability of the Secretary of State.
...

Interpretation of Part XI and supplementary provisions

163.—( I) In this Part of this Act—
...
"employee" means a person who is—
(a) 	gainfully employed in Great Britain either under a contract of service or in an office (including elective office) with emoluments chargeable to income tax under Schedule E; and
(b) 	over the age of 16;
but subject to regulations, which may provide for cases where any such person is not to be treated as an employee for the purposes of this Part of this Act and for cases where any person who would not otherwise be an employee for those purposes is to be treated as an employee for those purposes;

"employer", in relation to an employee and a contract of service of his, means a person who under section 6 above is, or but for subsection (l)(b) of that section would be, liable to pay secondary Class 1 contributions in relation to any earnings of the employee under the contract;

...

 (5) 	Without prejudice to any other power to make regulations under this Part of this Act, regulations may specify cases in which, for the purposes of this Part of this Act or such of its provisions as may be prescribed—
(a) 	two or more employers are to be treated as one;
(b)	two or more contracts of service in respect of which the same person is an employee are to be treated as one.”

The relevant regulations
23	Two Regulations are relevant to the preliminary issue here. These are again set out as the texts stood at 2000.

24	The first is the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978 no 1689) (“the Categorisation Regulations”). Regulation 5 of those Regulations makes provision for persons to be treated as secondary contributors. It provides that for the purposes of what are now sections 7 and 9 of the 1992 Act, in respect of any employment of an employed earner in any employment listed in paragraph (A) of Schedule 3 to those Regulations, then 

“the person specified in the corresponding paragraph in column (B) shall be treated as the secondary Class 1 contributor in relation to that employed earner.”

Section 7 of the 1992 Act is set out above. Section 9 deals with the calculation of the amount of any secondary contribution. Schedule 3 is entitled “Employments in respect of which persons are treated as secondary Class 1 contributors.”

25	HMRC contends that paragraph 9 of Schedule 3 is relevant. It provides:

Column (A)				

Employment by a foreign employer where –
(a) in pursuance of that employment the personal service of the person employed is made available to a host employer; and
(b) the personal service is rendered for the purposes of the business 
of that host employer; and
(c) the personal service for the host employer begins on or after
6th April 1994.

Column (B)

The host employer to whom the personal service of the 
employee is made available. 

26	Regulation 1(2) provides the following definitions, unless the context otherwise requires:

“foreign employer” in paragraph 9 of Schedule 3 to these regulations means a person-

(a)	who does not fulfil the conditions as to residence or presence in Great Britain prescribed under section 1(6)(a) of the Social Security Contributions and Benefits Act 1992; and

(b)	who, if he did fulfil those conditions as to residence or presence in Great Britain referred to in (a) above, would be the secondary contributor in relation to any payment of earnings to or for the benefit of the person employed;

“host employer” in paragraph 9 of Schedule 3 to these regulations means a person having a place of business in Great Britain.”

27	The other regulations are the Social Security (Contributions) Regulations 1979 (SI 1979 No 591) (“the 1979 Regulations”). The specific regulation relevant to the appeal is regulation 119. This is the first regulation of what is termed Case F of a series of cases where special rules apply to special categories of earners. Case F is entitled “Residence and Persons Abroad”. Regulation 119 is entitled “Conditions as to residence or presence in Great Britain”. It is necessary to consider the whole regulation, although it is only regulation 119(1)(b) that is specifically in issue.

28	Regulation 119 provides:

“(1) Subject to the following provisions of this regulation, for the purposes of section 1(6) of the Act (conditions as to residence or presence in Great Britain for liability or entitlement to pay Class 1 or Class 2 contributions, liability to pay Class 1A or contributions, or entitlement to pay Class 3 contributions) the conditions as to residence or presence in Great Britain shall be –

(a) as respects liability of an employed earner to pay primary Class 1 contributions in respect of earnings for an employed earner’s employment, that the employed earner is resident or present in Great Britain (or, but for any temporary absence therefrom would be present therein) at the time of that employment or is then ordinarily resident in Great Britain;

(b) as respects liability to pay secondary Class 1 contributions, Class 1A contributions or Class 1B contributions, that the person who, but for any conditions as to residence or presence in Great Britain (including the having of a place of business therein), would be the secondary contributor or the person liable to pay Class 1B contributions (in the following provisions of this Case referred to as “the employer”) is resident or present in Great Britain when such contributions become payable or then has a place of business in Great Britain, so however that nothing in this provision shall prevent the employer paying the said contributions if he so wishes;

(c) as respects entitlement of a self-employed earner to pay Class 2 contributions, that the earner is present in Great Britain in the contribution week for which the contribution is paid;

(d) as respects liability of a self-employed earner to pay Class 2 contributions, that the self-employed earner is ordinarily resident in Great Britain or, if he is not so ordinarily resident, that before the period in respect of which any such contributions are to be paid he has been resident in Great Britain for a period of at least 26 out of the immediately preceding 52 contribution weeks under the Act or the former principal Act or partly under the one and partly under the other;

(e)	as respects entitlement of a person to pay Class 3 contributions for any year, either that –
(i)	  that person is resident in Great Britain throughout the year,
                  (ii)  that person has arrived in Great Britain during that year and has been                                                              
      or is liable to pay Clas1 or Class 2 contributions in respect of an earlier     	period during that year; or	
      (iii) that person has arrived in Great Britain during that year and was either    	ordinarily resident in Great Britain throughout the whole of that year or 	became ordinarily resident during the course of it; or
	(iv) that person not being ordinarily resident in Great Britain has arrived in 	that year or the previous year and has been continuously present in Great 	Britain for 26 complete contribution weeks, entitlement where the arrival 	has been in the previous year arising in respect only of the next year.

(2) Where a person is ordinarily neither resident nor employed in the United Kingdom and, in pursuance of employment which is mainly employment outside the United Kingdom by an employer whose place of business is outside the United Kingdom (whether or not he also has a place of business therein) that person is employed for a time in Great Britain as an employed earner and but for the provisions of this paragraph the provisions of sub-paragraph (a) of the last preceding paragraph would apply, the conditions prescribed in that sub-paragraph and in sub-paragraph (b) of that paragraph shall apply subject to the proviso that no primary or secondary Class 1 contributions shall be payable in respect of the earnings  of the employed earner for such employment after the date of the earner’s last entry into Great Britain and before he has been resident in Great Britain for a continuous period of 52 contribution weeks from the beginning of the contribution week following that in which that date falls.”

Paragraph (3) applies only to students or apprentices and does not assist in this case.

29	Regulation 120 also deals with the jurisdictional issues involved with Class 1 contributions. It provides:

“(1) Where an earner is gainfully employed outside Great Britain, and that employment, if it had been in Great Britain, would have been employed earner’s employment, that employment outside Great Britain shall be treated as employed earner’s employment for the period for which under paragraph (2)(a) of this regulation contributions are payable in respect of the earnings paid to the earner in respect of that employment, provided that –

(a) the employer has a place of business in Great Britain, and

(b) the earner is ordinarily resident therein, and
 
(c) immediately before the commencement of the employment the earner was resident in Great Britain.

(2) Where under the last preceding paragraph the employment outside Great Britain is treated as an employed earner’s employment, the following provisions shall apply in respect of the payment of contributions –

(a) primary and secondary Class 1 contribution shall be payable in respect of any payment of earnings for the employment outside Great Britain during the period of 52 contribution weeks from the beginning of the contribution week in which the employment begins to the same extent as that to which such contributions would have been payable if the employment had been in Great Britain;   

(b) subject to the provisions of regulation 122 of these regulations, any earner by or in respect of whom contributions are or have been payable under the last preceding sub-paragraph shall be entitled to pay Class 3 contributions in respect of any year during which the earner is outside Great Britain form and including that in which the employment outside Great Britain begins until that in which he next returns there.”

30	There are no other regulations relevant to the jurisdictional issue in this appeal save for the definition of “secondary contributor” in regulation 1. This is:

“ “secondary contributor” means the person who, in respect of earnings from employed earner’s employment is, or but for the provisions of the Act relating to the lower earnings limit, would be liable to pay a secondary Class 1 contribution under section 4 of the Act”

31	The 1979 Regulations were consolidating regulations, as were the 1975 Act under which they were made and the 1992 Act that replaced the 1975 Act. The 1979 Regulations have now been succeeded by further consolidation in 2001, but that does not apply to these cases. The regulations that predated the 1979 Regulations and were consolidated into them were the Social Security (Contributions) Regulations 1975, (SI 1975 No 492). Those regulations were also consolidating regulations replacing the Social Security (Contributions) Regulations 1973, (SI 1973 No 1246). What are now regulations 119 and 120 of the 1979 Regulations first appeared as amendments to the 1973 Regulations made by the Social Security (Contributions) Amendment (No 2) Regulations 1974, (SI 1974 No 2035), coming into operation on 9 December 1974. The one relevant modification to this regime is the addition of the provision about host employers in the Categorisation Regulations from 1994. 

32	The amendments in 1974 were made under the authority of section 1(6) of the Social Security Act 1973 as part of, to quote the long title, “An Act to establish a basic scheme of social security contributions and benefits replacing the National Insurance Acts…”. They were new measures as part of the changes from the previous stamp-based contribution regime to the current scheme under which earners and employers pay earnings-related contributions under a modified PAYE scheme. 

33	The predecessor of what became regulation 119 is in a new regulation 93 to the 1973 Regulations. Save for updating to take in new classes of contribution, the text of regulation 93 in those Regulations is repeated verbatim in regulation 119, and the following regulation, 94, is similarly repeated verbatim in regulation 120. Unusually for the secondary legislation in this area, Parliament saw no need to amend the terms of either regulation since then, and no court or tribunal has previously been asked to consider them. 

Discussion of the legislative provisions
34	Whatever meaning is to be given to the language of these regulations is therefore to be taken as the meaning appropriate on original enactment in 1974. Any flavour to be obtained from context is to be obtained from the context of the reforms in the Social Security Act 1973. This reformed the social security contribution system and consolidated those aspects of the system that were continued. It did not also consolidate the social security benefit system. It was introduced to a social security system that was at that time essentially contributory with regard to all the main benefits for sickness, unemployment, and retirement pensions. 

35	At that time both the contributions scheme and the benefits scheme were run by the same government department as part of a global system where contributions paid for benefits through the National Insurance Fund. While the tasks of collecting contributions and paying benefits have now been assigned to separate government departments, the history of the contributory system is still relevant in several ways. For example, as Mr Goldberg QC commented, contributions are not taxes. They are not collected or enforced in the same way as income tax but through the civil courts. The history includes what was originally common language in jurisdictional tests applying both to contributions and to benefits. Being present in the jurisdiction was provided as a jurisdictional test for claiming and being paid several benefits. One example is child benefit, for which HMRC is now responsible. This illustrates that the test of being present may have a particular significance for benefits in a way that is irrelevant to income tax. This is so because entitlement to some benefits, including child benefit, requires residence or presence in the jurisdiction on every day of entitlement, unless specific rules excuse absence. Being present in that context therefore usually means being present on a continuing basis – continual if not continuous. Because entitlement to a weekly or daily benefit may be for a short period only, that presence may not be such as to amount to residence if viewed in isolation of the history of the claimant as at the first day of a period of claim.    

36	That forms the general context in which regulation 119 is to be interpreted. The specific context of regulation 119(1)(b) is that it follows sub-paragraph (a) and is contingent on it. Save for cases not relevant here, there cannot be a secondary contributor in an earnings period for a primary contributor unless there is also a primary contributor. So the starting point is the status of the alleged primary contributor. The jurisdictional rule for primary contributors is:
	
“(a) as respects liability of an employed earner to pay primary Class 1 contributions in respect of earnings for an employed earner’s employment, that the employed earner is resident or present in Great Britain (or, but for any temporary absence therefrom would be present therein) at the time of that employment or is then ordinarily resident in Great Britain;

This rule is limited to asserting jurisdiction only over individuals. It adopts two elements to the rule: the nature of the jurisdictional link, and the time frame within which the link is to be tested. The link is in the triple alternative of residence, presence or ordinary residence. The temporal rule is that the link must be there “at the time of that employment”. As drafted, that is clearly a continuing test. It applies generally to the employment contract. It is not limited, for example, to presence on a pay day.

37	The temporal rule in regulation 119(1)(a) is to be read in the context of the general temporal rules that apply to Class 1 NI contributions. Liability is defined by section 6(1) of the 1992 Act as modified by the 1979 Regulations. Liability is for tax weeks, or other earnings periods. The question is not whether someone is resident or present throughout the contract of employment (save for authorised exceptions) but whether that individual is present (again subject to exceptions) throughout that tax week or other earnings period. I have assumed for this appeal that the relevant earnings period is a month (more technically, a tax month). The test which I have assumed is met for the two individuals against whom decisions have been issued is that they are resident or present “at the time of”  that tax month for that employment.   

38	In my view that is to be judged on the facts taking a broad view of the full situation with regard to the employment over the relevant earnings period. Clearly the employee has to be ordinarily resident, resident or present here for some of the time, but I think not all of it. That is the same approach as is applied to social security benefits, save that the rules are usually clearer for specific benefits on the temporal aspects of the rule and the exceptions to the need for someone to be present. Fleeting presence – my example at the hearing of travelling by road through Britain from France to Northern Ireland – would not be enough. There has to be a flavour to the term, in my view, of continuing presence if not continual or continuous presence.  

39	The question whether someone is a secondary contributor under regulation 119 therefore only arises if on the facts the employee or alleged employee is, in that sense, continuing as a person resident or present in Great Britain through earnings periods and from one earnings period to another. So there must be at least this indirect – and continuing - connection of an alleged secondary contributor with the British social security jurisdiction for the question to arise at all. 

40	Regulations 119 and 120 give other suggestions about the drafter’s approach to language and the temporal rules expressed or implied. There is no consistent policy across the various provisions dealing with liability to Class 1 or Class 2 contributions, although it is clear that the rules applied to the determination of liability impose a higher test than those applied to entitlement to pay (such as entitlement to pay secondary Class 1 contributions, Class 2 contributions or Class 3 contributions in the absence of liability). They also suggest a strong temporal link is needed where the absence of a contributor from Great Britain is particularly in evidence in the situations covered by regulations 119(2) and 120(1). These provisions also indicate that the link to Great Britain of an employer can be a place of business rather than the place of business. 
41	Regulation 119(1)(b) was, and remains, drafted in tight terms that need unpicking to separate the parallel jurisdictional tests in it. The tests are:

	as respects liability to pay secondary Class 1 contributions ...

	the person who ... would be the secondary contributor

	is resident  [in Great Britain] 

or present in Great Britain

	when such contributions become payable

	or then has a place of business in Great Britain

42	I omit from that formulation that “the employer” may voluntarily pay the contributions. I assume that GSSL does not wish to volunteer the contributions (again I have not seen specific evidence from GSSL of that point). It may be observed however that, taken purely at face value, that gives a somewhat surreal flavour to this case. GSI appeared before me arguing that GSSL, a company with which it is clearly closely associated, should be made liable to the secondary contributions on its employees, and not it, GSI. Regulation 119 provides the simplest of answers to that: if so, GSSL can simply volunteer to pay them. GSSL is, on the evidence before me, not willing to pay them. Why is GSI trying to impose the obligation on GSSL when it knows that GSSL does not want to accept that obligation? The answer to that question is beyond the scope of this preliminary decision. 

43	Another aspect of this test is missing from subparagraph (a). An employer can be an individual or a legal person. The residence or presence of an individual employer is tested in the same way as that of an employee: the employer must be resident or present. That suggests that the test of being present for an individual employer is in the context of continuing presence in the same way as for an employee of that employer. There is also the factor that one individual can employ another without employing that individual for business or at a place of business. Individual employers may have a place of business, but that is not necessary for every employment. The obvious example is employment of domestic staff, carers, childminders, and similar staff. There is no separate rule dealing with incorporated employers. So in this compact form of drafting the test of being present is applied to them as well. A company cannot engage staff in a personal capacity. If it employs a childminder it is because the company is in the business of childminding. A company’s employees provide personal service in connection with the business of the company, whatever that business be. It is not clear to me, on that analysis, that the drafters of this rule intended “present” to be an additional jurisdictional test for companies as well as residence and having a place of business. Linked to that is another consideration. An employee employed to give personal service to an employer or the employer’s family such as that of a carer or childminder will by the nature of that service be present where the employer is present. That does not apply where the employer is conducting a business. But in that case the employer may be expected to have a place of business where the employee works. The formulation in subparagraph (b) is therefore that the jurisdiction test includes two factors: the way in which the secondary contributor is linked to the jurisdiction and the temporal rule – the time or period for which that test must be met. 
Foreign employers
44	That analysis is altered only by the overriding provision inserted into the Categorisation Regulations from 1994 about foreign and host employers. This is the provision on which HMRC relies as modifying the operation of regulation 119(1)(b) in this case. The modification under the Categorisation Regulations applies if an individual is employed by a “foreign employer” where –

“(a) in pursuance of that employment the personal service
of the person employed is made available to a host employer; and

(b)  the personal service is rendered for the purposes of the business 
of that host employer; and

(c) the personal service for the host employer begins on or after
6th April 1994.”

45	This provision is also one not previously considered by courts or tribunals. Definitions (set out above) indicate that GSSL is a foreign employer if, as HMRC contends, it does not meet any of the jurisdictional tests in regulation 119(1)(b) but would otherwise be the secondary contributor for an employee. If GSSL is a foreign employer, which GSI contests strongly, then it appears not in dispute (or at any rate GSI did not dispute before me) that GSI would be the host employer of any GSSL employees seconded to it as it has a place of business in Great Britain. Beyond that, there is little guidance in the legislative record about the intended scope of this provision. Nor was I offered any assistance by the parties in interpreting the tests. 

46	It seems clear that test (a) means that there must be in place an agreement between the contended foreign employer and the contended host employer that specifically covers the position of the individual primary Class 1 contributor. Test (b) is a factual test – the primary contributor provides “the personal service” for which he or she is employed to the host employer. I take that to mean that, looking at the matter broadly, the arrangement is that the primary contributor works for the host employer rather than the foreign employer as an employee (and not, for example, as a consultant). This would exclude cases where someone works for both the foreign employer and the host employer to a significant extent but under a single contract of employment. I adopt that interpretation because of the use of the definite article “the” before the reference to personal service. If it were a reference to “personal service” without the definite article then it could be argued that any part of the personal service of the individual would activate the test. On the reading I adopt, and subject to clarification of the proper burden of proof in applying the provision, it must be shown as fact in a broad sense that the individual is working for the host employer and not the foreign employer.  

47	Test (c) is ambiguous. It could be read as applying to any personal service provided by the primary contributor on or after the start of the 1994-95 tax year, or it could be read as applying only where the agreement between the foreign employer and the host employer is such that the first such personal service is provided to the host employer after that date. In other words, test (c) could be read as either covering only new arrangements or as covering existing arrangements prospectively. In my judgment it is the latter of those interpretations that is correct. This is because it is the specific personal service under test (b) to which the date applies, not the agreement between employers to which test (a) relates. That also sits more readily alongside the terms of regulation 119, where the liability is by reference not to employments but to earnings periods. 

The arguments of the parties
48	GSI put its case in its skeleton argument as follows:

“GSI’s case is that GSSL was present in Great Britain at all material times. The NICs legislation does not stipulate when a person is present in Great Britain. Regulation 119(1)(b) draws the net widely (including provision for a person voluntarily to submit to the jurisdiction for NICs purposes): a person can be “present” in Great Britain without being resident or having a place of business here...

GSI’s case is that GSSL was liable to pay any NICs due because it was present in Great Britain. That does not mean that GSI or GSSL contend that GSSL had no place of business here for all and every possible purpose. It means that, at this preliminary hearing, GSI’s case is put on the basis that GSSL was present here; it is put on that basis because it is believed that GSSL was present here and did not (in the relevant sense) have a place of business here.”

49	In closing, Mr Goldberg QC modified that submission. He submitted for GSI that if I did not accept his main argument then I might find that GSSL did have a place of business here. I understand that this is in contrast not only to the skeleton argument noted above but also to the representations made – with GSSL as a party – to this tribunal when the matter was considered on 25 September 2009 and to the Upper Tribunal in the hearing on 21 October 2009 that led to the direction for this hearing. As GSSL was then present but was not present before me and gave no evidence before me, I do not treat that as any sort of concession by GSSL as against its stated position at the previous hearings. Mr Goldberg QC supported that by the evidence of the witness and the documents included in that evidence. He argued that on the facts GSSL was present despite it being registered and resident outside the jurisdiction.

50	Mr Gammie QC put the case for HMRC on the basis that GSSL was a “foreign employer” within the definition in regulation 1(2) of the Categorisation Regulations. In his view the evidence clearly showed that GSSL was not resident in Great Britain nor had any place of business in Great Britain at any material time. It ceased to have a place of business in Great Britain, he submitted, when it withdrew its registration of a British place of business from Companies House in 1991. 

51	His argument on being present took a different approach to that of Mr Goldberg QC. In his view the presence of GSSL was not a question of fact to be based on the evidence. Rather it was determined simply by identifying the country of incorporation of the company and any place of business. If a company was not incorporated in Great Britain and not resident here and had no place of business here, then it could not be present here. In his view much of the evidence presented by GSI was irrelevant. He added a second argument at the hearing, namely that it was open to the tribunal to find on the evidence that the appellant company had not established its case. But he rested his main argument on authorities that limited the concept of the presence of a company in the way he had argued.

52	Those arguments are not susceptible to resolution by reference to the terms of the legislation viewed in isolation. I take from them two issues for resolution. Did GSSL have a place of business in Great Britain at the relevant times? If it did, then I need take the matter no further. If no, was it present here at the relevant times?  

Place of business
53	If GSSL did have a place of business in Great Britain at the relevant times, then this would in different ways meet both the argument for GSI and the argument for HMRC. If that is so on the facts, then GSSL cannot be a foreign employer. In considering the question, I take the point noted above that a place of business is sufficient. I do not have to identify the place of business. 

54	I start from the position that the only submissions for GSSL on the record in these proceedings are that it did not have a place of business in Great Britain at any time relevant to these appeals. Has GSI shown, on the balance of probabilities, that GSSL was wrong in that submission? Is there a more subtle point here, as Mr Goldberg QC raised, that it can have a place of business for these purposes but not for other purposes? 

55	I do not think this point needs extended analysis in the context of this preliminary issue. There is no specific definition of “place of business” in the 1979 Regulations or the enabling Act. It is a question essentially of fact, though it may be examined in the context of other legislation dealing with places of business. And I do not need to digress into the interesting issue of whether there is a difference between someone “establishing” a place of business in the jurisdiction and someone “having” a place of business here. Nor do I need to reflect on the discussion by Mr Goldberg QC about the meaning of “place of business” however established. This is because in my view the way the case was put to this tribunal, and to the Upper Tribunal before this provisional issue came for decision and when GSSL was party to the hearings, is such that, applying the balance of probabilities to the evidence and the submissions of the parties including GSSL, the answer is clear.    

56	I find that GSSL did not have a place of business in Great Britain at any time relevant to these appeals (that is, between 1997 and 2000). 

57	I do so for several reasons. First and foremost, this is what GSSL, as a party to the proceedings, told both this tribunal at an earlier hearing and the Upper Tribunal at the hearing that gave rise to this preliminary question. As it is no longer a party to these proceedings I must put weight on this.  

58	Second, this is what the company secretary of GSSL, writing as such on GSSL notepaper from the British Virgin Islands in 1991 told Companies House. It did so to cancel its previous registration of a place of business in Great Britain. Companies House was specifically told that it was to take the letter “to be notice of the company’s ceasing to have a place of business in Great Britain” as from the date of the letter, 31 July 1991. This was pursuant to section 696(4) of the Companies Act. That has not been reversed. GSSL remains unregistered. Again, weight should be put on that statement, and the absence of any revocation of that statement, to the central authority dealing with such registrations. 

59	Third, that was confirmed by M R Housden, writing on GSI notepaper as a GSI executive director, to the Inland Revenue Large Business Office on 13 April 1999. His letter was in reply to a letter from an inspector asserting that GSSL had a permanent establishment in the United Kingdom and that therefore consideration should be given to applying the US-UK double tax agreement to its profits. Mr Housden’s reply stated:

“GSSL is not considered to have a place of business in London as it does not make “sales” in the UK but only incurs expenses.

You state that GSSL has a fully staffed office in London (and nowhere else). In fact GSSL has no office in London at all.

GSSL does not provide services in the UK but provides services to the UK …

GSSL does employ a large number of people located in the UK. Such persons do not undertake any business activity for GSSL, their work is performed for GSI and associated entities. 

Where local regulations in the country where GSSL employees work so require, GSSL endeavours to comply with any wage withholding and social security obligations. This they do with help of GS New York or the local country affiliates.” 

Mr Housden confirmed this again the following year, writing on GSI notepaper to HM Inspector of Taxes Large Business Office on 8 May 2000 in a letter headed “GSSL Year ended 30 November 1999”:

“As you are aware, this company [GSSL] is not registered to conduct business in the UK and does not in fact conduct a business in the UK. Historically, the fundamental management of GSSL has been exercised in and from the United States. Accordingly, the company is not required to file accounts with Companies House in the UK.”

Mr Goldberg QC argued that this was a letter for corporation tax purposes only. I do not read either of these letters that way. I read them as making a series of clear, unambiguous, considered statements in the present tense to explain why the GSSL accounts were not available at Companies House or otherwise to the public or to enquirers in Britain and why GSI did not regard GSSL as within the jurisdiction of United Kingdom corporation tax. The letters also indicate the advantages to GS of that arrangement. I also note that in writing these letters Mr Housden, who I am told was a GSSL director at the time, was not writing in that capacity or on GSSL notepaper or from a GSSL address. He was writing in his capacity at GSI. That is of course consistent with the statements made in the letter that there was no British address for GSSL. That also appears consistent with an agreement between GSSL and GSI that I note below under which Mr Housden had been seconded as an employee to GSI. In addition, they had agreed that the functions in which he worked with regard to employees were being undertaken by GSI for GSSL.  

60	Taken together, I put considerable weight on those issues. I would be most reluctant to decide that GSSL was in breach of statutory obligations in its withdrawal or non-renewal of that registration without cogent evidence that this was so when it has itself asserted that its non-renewal of registration was the correct course of action. And I would be most reluctant to find that Mr Housden had misrepresented GSSL’s position to HMRC. I do not accept without evidence that deregistration and subsequent representations of this sort would be made by such a company without all necessary advice and consideration. I also consider it important that there is a clear explanation – unrelated to tax liabilities - why that action was taken. It was not part of a tax avoidance scheme. For example, such evidence as I have seen suggests GSSL made no taxable profits. It was, along with the registration of the company in the British Virgin Islands, a way of keeping information about the GS accounts and payroll out of the public domain and confidential.

61	Fourth, I have had no evidence or submission from GSSL to say that it was wrong in taking that position either in that letter of earlier in these proceedings. 

62	Fifth, GSI raised this possibility only in the hearing before me and has not, so far as I can see, raised it on any previous occasion either when appealing against the original section 8 decisions or in the subsequent correspondence. Nor do I know that GSSL is actually aware of this stance by GSI. In addition, when HMRC first took action against GSI about these liabilities, GSI did not raise this point or pass the matter on to GSSL but itself accepted receipt of the appropriate notices. 

63	Sixth, there is nothing in the witness statements of the witness for GSI or in the cross-examination of that witness that asserts or clearly implies that GSSL had a place of business in Great Britain. 

64	 I therefore reject on the facts Mr Goldberg’s second argument that I could find that GSSL did have a place of business in Great Britain at the relevant times. In doing so I do not consider I need examine any of the authorities about what a “place of business” might mean. 
Presence or being present
65	I therefore examine the arguments and the evidence to see if they establish either that GSSL was present notwithstanding that it was not resident here and had no place of business here or that as a non-resident company it could not be present in the absence of a place of business. I regard this as an intermixed issue of both law and fact. 

66	I agree with Mr Gammie QC that the decision of the Court of Appeal in Adams v Cape Industries [1990] 1 Ch 433 reflects precisely the problems of looking to see if a company is present. Slade LJ, giving the judgment of the court, at page 519, puts the problem thus:

“The residence or presence of a company is a difficult concept. A corporation is a legal person but it has no corporeal existence. It can own property and can, by its agents, perform acts. It is clear that if an English corporation owns a place of business in a foreign state under which it carries on business, that English corporation is, under our law, present in that state for the purposes of in personam jurisdiction. These clear circumstances may, however, be varied in different ways. The corporation may not own the place of business but have only the use of it or part of it. It may, instead of carrying on it own business by its own servants, cause its business to be done by an agent or through an agent in the foreign state. The question will then arise whether the commercial acts done are, for the purposes of our law, to be regarded as done within the jurisdiction of a foreign state by the agent in the course of the agent’s business or by the corporation itself.”

At page 521 he adds, referring to Littauer Glove Corporation v F W Millington (1920) Ltd, (1928) 44 TLR 746 that:

	“Thus, the effect of Salter J’s decision was that if a foreign judgment is to be 	enforced in this country against a corporation, it must be shown that at the 	relevant time (a) the corporation was carrying on business, and (b) it was 	doing so at a definite and “to some reasonable extent permanent place”. This 	test is significantly different from that applicable in the case of judgments 	against individuals … we see no reason to doubt the correctness of this test so 	far as it goes. It seems to us consistent with authority and to represent a 	common sense approach to the question of “presence” in the case of a 	corporation…” 

At page 523 he comments:

	“The words “resident” and “present” or equivalent phrases have been used 	interchangeably in argument, just as they have been used in the cases; we see 	no objection to this terminology if it is understood that in the case of a 	corporation the concept of “residence” or “presence” in any particular place 	must be no less of a legal fiction than the existence of the corporation itself.”

67	Those difficulties apply here. How is “present”, as a legal fiction, to be understood about a secondary contributor of NI contributions? There are two considerations that point towards a specific content of that test, as against the application of some abstract, fleeting presence interpreted out of the context of the reason why the presence is being considered. The first is that the jurisdiction here is not limited to the in personam jurisdiction for the service of court proceedings. It is a continuing obligation to meet the administrative duties of being an employer and the fiscal obligation to pay the secondary contributions. The other is that, in the context of this case, if an employer uses a local agent then that local agent may be directly caught by the rules as a host employer rather than indirectly as an agent. Presence through an agent can make the agent the secondary contributor. This leads to a different legislative answer to that which might be the answer were that statutory rule not in operation.    

68	The first issue raised by regulation 119(1)(b) is a temporal issue: when does the secondary contributor have to be present? The primary contributor has to be present on a continuing basis - “at the time of that employment”. The test of the presence of an employee suggests that the presence is a continuing presence. The equivalent test in this subparagraph is “when such contributions become payable”. We have also seen that the other tests that may apply to employers suggest a continuing link to the jurisdiction. 

69	The phrase “when such contributions become payable” is another ambiguous provision on which I heard little argument from the parties, and on which I can see no assistance either in the legislative context or any previous authority. Yet it is important that it be clarified. At the extreme of Mr Goldberg’s QC’s argument about presence, a fleeting presence would be enough – just enough to serve someone with a writ. At the opposite extreme is the argument that the obligation arises during each earnings period once it is clear that the primary contributor is liable to a primary contribution in that period. The phrase is “payable” and not “paid” so there is no need for actual payment nor for a resulting liability to have accrued. If the primary contributor has a contract of employment, and the secondary contributor is thereby due to pay the primary contributor earnings that exceed the lower earnings level in any earnings period, then contributions are payable once that period has started or, at the latest, when the payable earnings for that period have in fact exceeded that amount. If that is the correct interpretation, then the secondary contributor must in practical terms be present on a continuing basis in each earnings period and in practice most of the time.  

70	There is an intermediate interpretation along the lines of the arguments about PAYE in the House of Lords decision in Clark v Oceanic Contractors Inc [1983] AC 130. This is that the employer must be present to meet the obligations of being employer under the administrative system imposed to collect NI contributions and meet statutory pay obligations. 

71	The judicial history of that case well illustrates the difficulties courts and tribunals have with issues such as being present when legislation is not clear. It concerned whether the company, Oceanic, was required to deduct income tax under Schedule E from North Sea workers under the PAYE system. HMRC’s predecessor assessed Oceanic on the basis that it was required to do so. The Special Commissioners reversed this. Dillon J reversed them. The Court of Appeal allowed an appeal against his judgment. The House of Lords then, by a three to two majority, reversed the Court of Appeal. Further, of the three judges in the majority only two gave full considered judgments. I take from this that the decision was one that generated considerable difficulty and doubt. Nonetheless, the guidance of the decisions of Lord Scarman and Lord Wilberforce, with whom Lord Roskill agreed, constitute not only the leading decision on the topic but in reality the only authority that is closely analogous to this case. Even then, the analogy is not that close. The majority of the House of Lords regarded the provision in question, section 204, imposing PAYE, as being an administrative obligation not a charge to tax. Regulation 119 imposes both a charge and an obligation. Nonetheless the case assists because it concerned a company that was not resident in the United Kingdom for tax purposes.  

72	  Lord Scarman noted at the start of his opinion that it had been found as fact that Oceanic accepted that it had a place of business in the United Kingdom and was liable for corporation tax profits from its activities here. And it had registered as an oversea company at Companies House. Against that background Lord Scarman examined the principles of interpretation of the jurisdictional limits on United Kingdom legislation. He rehearsed the Crown’s argument that there was no limitation in section 204 then posed a series of questions:  
	
“How can the PAYE duties be enforced? How can the system be made to work? How can it be supervised? How can the necessary documents be obtained for inspection by the revenue, unless the foreign corporation is compliant? It all adds up to a practical impossibility of enforcing or monitoring the system against an uncooperative employer outside the United Kingdom making payments outside the United Kingdom.”

On that basis he rejected the Crown’s broader argument about jurisdiction and examined the narrower one based on a provision relating to the continental shelf on which the workers were employed. He concluded that this was not decisive, but he considered that:

“It remains, however, an important consideration. It goes some way towards establishing a company’s presence in the United Kingdom that the duties performed by a company’s employees in the United Kingdom sector of the North Sea are to be treated for the purposes of income tax as performed in the United Kingdom.”

73	His Lordship then considered whether presence was a sufficient test for the section, and set out why he considered Oceanic to be present.

“Is, then, the true limitation upon the section 204 liability the presence within the United Kingdom of the person making the payment, even though he be non-resident and the payment be made outside the United Kingdom? The “tax presence” concept was strongly attacked by Mr Heyworth Talbot QC for the respondent. He submitted that income tax knows nothing of such a concept as determinant of tax liability. Presence is only relevant as evidence of residence: and Oceanic is admitted to be a non-resident corporation.

My Lords, I find nothing anomalous or contrary to principle in a “tax presence” being the determinant of the section 204 liability…

My Lords, it has been repeatedly, and correctly, asserted in argument that this appeal is not concerned with the charge to tax. Indeed, it is conceded that the income, tax upon which the revenue seeks to collect by PAYE, is chargeable under Schedule E. Residence of the taxpayer is, of course, one of the factors determining chargeability to tax. But the present case is concerned with the territorial limitation to be implied into a section which establishes the method of tax collection. The method is to require the person paying the income to deduct it from his payments and account for it to the revenue. The only critical factor, so far as collection is concerned, is whether in the circumstances it can be made effective. A trading presence in the United Kingdom will suffice.

Upon the facts of this case a trading presence is made out. For the purposes of corporation tax Oceanic, it is agreed, carries on a trade in the United Kingdom which includes its operation in the United Kingdom sector of the North Seas. For the purposes of this trade it employs a work force in that sector, whose earnings are assessable to British income tax. Finally, Oceanic does have an address for service in the United Kingdom.”

74	Lord Wilberforce considered the provisions in section 38 of the Finance Act 1973, imposing tax on activities in the British sector of the North Sea, “as critical in this appeal”. In particular he cited section 38(4) which treated profits or gains arising to a non resident person from activities in the United Kingdom sector of the North Sea as profits or gains arising from that person through a branch or agency in the United Kingdom. He pointed out that this brought such a company within the scope of the taxing provision in section 246 of the Act. Oceanic was clearly chargeable to tax under that section and “since it has a registered address in the United Kingdom in compliance with section 407 of the Companies Act 1948, this tax can be enforced against it.” 

75	His Lordship then considered the interpretation of section 204 and its jurisdictional limits:

“So, the question one has to ask in relation to section 204 is this: why should not this section apply to a company which, as regards the very activities to which the section relates, is itself made subject to United Kingdom tax legislation? Why not more particularly, when the employees to whom the question relates are employed on precisely those activities, so that the wages they are paid, which are treated as being in respect of duties performed in the United Kingdom, enter into the trading accounts of the company. To the answering of this question non-residence is quite immaterial, as, indeed, section 246 itself shows; it disregards non-residence or, perhaps more accurately, it makes “non-residence” a condition of liability and fastens upon trading through a branch or agency. This provides a clear, and surely satisfactory, answer to the question of construction of section 204. As to such companies section 246 provides a convincing reason why the respondent company should be liable to operate the PAYE system. I should add that, as the company has an address for service in the United Kingdom, the liability can be enforced against assets here.”     

76	Lord Roskill briefly agreed with these views, while Lord Edmund Davies and Lord Lowry dissented. In particular, Lord Edmund Davies thought section 204 penal and Lord Lowry did not consider that matters such as an address for service were matters on which the revenue could soundly rely. The dissenting opinions were therefore looking for a stricter test than did the majority, not a lighter test. 

77	I take the indications in the speeches of Lord Scarman and Lord Wilberforce as providing the best indication of the extent to which presence can be used in the context of regulation 119 subject to the point that it imposes a primary liability on the employer, and not only an obligation to collect contributions from the employees’ pay. It also imposes other payroll obligations on the employer with regard to the employees. And I take the point that the rules are to be tested against the uncooperative employer, not one willing to enter into dialogue. 

78	The indications on which their Lordships put weight in accepting that Oceanic was present in the jurisdiction were: a branch or agency actually, or deemed to be, in the United Kingdom, or in other terms a trading presence; a registered address for service; a personal obligation on the employer to pay tax to the United Kingdom drawn from the activities involving the employees; an ability for the revenue powers to enforce the ongoing duties on a reluctant employer of administering the deduction system.

Was GSSL present? 
79	In what way was GSSL present? The starting points of comparison have been set out above. It had deregistered from Companies House and did not in that sense have an address for service. It was not liable to United Kingdom corporation tax. It had no place of business in the United Kingdom.

Employees and the payroll function
80	Did it have employees here? Lord Wilberforce considered in his opinion that it was not material to his analysis that the Oceanic employees were employed under contracts of employment not governed by English or Scottish law. What was relevant was that the employees were liable to United Kingdom income tax. 

81	The question in this case is somewhat different, although the comment is relevant. For practical purposes, as against the point about the proper law of the contract of employment, the issue is who was benefiting from the service of the employees?  From this standpoint a critical step in the HMRC argument becomes relevant at this stage as well as at the stage of identifying a host employer.

82	The question is whether GSSL was present because it was conducting activities through its employees in the United Kingdom. If it was profiting from such services (and I have no evidence that it did) then it was not paying tax in the United Kingdom on such profit. Rather, its relationship with its employees was restricted because it had passed the benefit of their service to other companies in the GS group – in particular GSI.

83	At a late stage in this appeal GSI produced, through its witness, a short Services Agreement, signed and dated 3 October 1988, between GSSL and GSI. The agreement recites that GSSL seconds to GSI and affiliated companies pursuant to a Secondment Agreement concerning certain employees. The agreement then records that:

“GSI shall provide payroll, benefit, and related administrative services in respect of the employment of the Employees and shall be responsible for the provision of all remuneration, benefits, and perquisites to each Employee.”

The agreement goes on to provide that GSSL will reimburse GSI for these payments and all administrative expenses. 

84	So the functions with which their Lordships were concerned in Oceanic, and the related functions about NI contribution collection and statutory payments, were in fact undertaken in the United Kingdom by GSI from the date of that agreement. Mr Goldberg QC was unable to offer evidence about the termination of this agreement, and the witness clearly had no evidence to assist. I therefore take that agreement to be in effect at the times relevant to this appeal. That is also consistent with the point made by Mr Gammie QC that the notepaper used for correspondence by Mr Housden, and more generally with HMRC’s predecessors was GSI notepaper, not GSSL notepaper. 

85	Under what arrangements were the employees employed? I was given evidence of this both by the witness and in the documents. These included her letter of engagement. The witness told the tribunal that she was not aware of precisely what part of the GS organisation had sought to recruit her or had interviewed her. Her letter of appointment was a GSI letter sent from an executive director at the London GS campus. Like other letters shown to the tribunal it began:

“I am pleased to offer you employment in London with GSSL. You will be seconded by GSSL to GSI in the capacity of Accountant …”

It then goes on to set out other terms and conditions, as do similar letters to others. All the letters are GSI letters but offer appointment with GSSL and secondment to GSI. 

86	I was also shown a 1995 resolution of the board of GSSL resolving that certain individuals were authorised to agree terms of and execute on behalf of the company all employment offer letters, and a series of subsequent resolutions to similar effect. But I was shown no offer letter executed by anyone on behalf of GSSL. They were all GSI letters in the form noted above. Nor were all of them executed by persons named in the resolution I was shown. I was shown one letter to a new employee dated 10 February 1997, and another dated 19 March 1997 signed by someone named in such a resolution, Steven Ricci, but the resolution was dated the following year, on 8 January 1998, and the letters was both GSI letters - not GSSL letters - designating Mr Ricci in the heading an Executive Director Personnel of GSI. 

87	I conclude on the facts that Mr Housden was correct when he asserted to HMRC that GSSL had no staff working for it in the United Kingdom. HMRC do not dispute that GSSL was the employer, but the only evidence I have seen suggests that GSI acted as agent for GSSL in making those appointments. The evidence also makes clear that the employees did not undertake business for GSSL. They undertook business only for GSI or other GS affiliates. Even the payroll and similar functions were performed for GSSL in the United Kingdom by GSI not by GSSL itself.

An office or other location in the United Kingdom
88	Mr Goldberg QC also sought, through his witness, to suggest that GSSL was present in the United Kingdom at the GS London campus. I find no significant evidence of that. I do not put much weight on the absence of any nameplate on the doors of offices it may use. Many important public and private offices in London do not announce to the public what they are. More important is the absence, in the evidence, of any regular use by anyone of any notepaper or other stationery indicating an address for GSSL in London. I put no weight on the evidence put forward by the witness of leases. The documents were photocopies of extracts of leases, and not the complete documents. The witness had not seen the original documents, and clearly had no specific knowledge, of any part of their contents or the arrangements made by or under those documents. Nor was it in any way her function to deal with such matters for any part of GS. The photocopies do not assist. Nor does her evidence about the parts of the buildings occupied, for example, by the payroll function of the GS group. On the evidence of the agreement noted above, that was a GSI function in any event. I saw nothing suggesting that there was any specific part of the GS campus that could be regarded in any way as occupied by GSSL. I regard as accurate the contemporary statement by Mr Housden noted above that in fact GSSL had no office in London at all. And, unlike the facts in Oceanic, there were no suggestions it had any office, place of business, branch or agency, or employees working for it, anywhere else in the United Kingdom. 

Banking activities
89	I was also presented with evidence through the witness that GSSL ran bank accounts in London, and paid HMRC from those accounts. Again, I find this of little assistance. The correspondence about setting up the account was not with GSSL but with other GS entities. I was told by the witness that the authority to open accounts rested in New York, not London, or elsewhere. The accounts were operated through powers of attorney, but I was given no evidence about whether those attorneys acted as GSSL attorneys. I do not consider that as a matter of law or fact it can be said that a company that is part of a corporate group is present for these purposes in the United Kingdom because there are individuals who are directors or employees within the group who have powers of attorney to operate its British bank accounts. And the functions for which the payroll accounts were used were in any event being conducted, as a matter of fact and of agreement with GSSL, by GSI. Further, the money in the accounts was largely passing through the accounts from other GS entities to the intended employees or other recipients. Based on the accounts and other documents I was shown, it was not in any sense “GSSL money”.   	

Service of proceedings
90	I similarly put no little weight on the evidence Mr Goldberg QC sought to introduce through the witness about service of court proceedings. It appeared that all the witness, and indeed her legal advisers, had seen and could produce were redacted photocopies of documents that purported to be parts of court actions involving GSSL. I have no knowledge of the basis on which GSSL accepted service of those documents. I cannot check who the other party was in each case because of the redactions. Nor had the witness seen the originals. Nor did she have any relevant knowledge, because of her employment or otherwise, about the background to any of these documents or about the general GS procedures for receiving and handling such actions. Nor did I receive any evidence from anyone who did have such knowledge. It may have been - I do not know - that the documents were received by GSI or an affiliate and passed to GSSL, and accepted by GSSL within the GS group. Or it may be that GSSL was nominated as the recipient, whether or not it was obliged to accept them, for reasons the GS group considered appropriate. Or maybe England was regarded as a forum conveniens for the cases and no point was taken about jurisdiction. The only issue on record – and the issue on which both Lord Scarman and Lord Wilberforce put weight in Oceanic – was that GSSL did not have a registered address for service because it had chosen some years before to withdraw its registration, and therefore its address for service, from Companies House. I am not satisfied that I have seen anything to persuade me that GSSL had an address for service in Great Britain and I find that at the relevant times it did not have such an address.    

91	Mr Goldberg QC addressed the tribunal at some length about the rules for service of proceedings. In particular, he developed an argument about the expansion of the scope of the rules of service through the Civil Procedure Rules and otherwise. I record those arguments, but do not find they assist and therefore do not discuss them in detail. I agree with Mr Gammie QC that on the evidence they are largely irrelevant. I also agree with Mr Gammie QC that it is unlikely that one could consider the jurisdiction under regulation 119(1)(b) to have been expanded because the rules for service in the Civil Procedure Rules had broadened how one might serve proceedings on a potential defendant. In addition, as I pointed out at the hearing, the rule in regulation 119(1)(b) must be applied equally in Scotland and in England and Wales. It would be wrong in principle to have a more extensive liability in one of those countries to the other for payment of secondary contributions. I was not taken to any details about Scottish rules of service and I heard no argument about the Scottish position. 

92	More important is the consideration that regulation 119 imposes both a continuing administrative obligation and a financial obligation to HMRC for each tax month or other earnings period. It is not limited, in the way section 204 was, purely to an administrative issue. It is an obligation more of a kind that Lord Edmund Davies regarded in that case as penal, and therefore to be construed narrowly. With the greatest respect, I do not consider that this liability can be considered in any way as penal. The test has to reflect continuing enforcement and the administrative and fiscal obligations and not merely the limited kinds of presence adequate for the modern rules of service. 

93	I also find of little assistance the correspondence between GS and HMRC and its predecessors. This is for the reasons set out above. Most of the correspondence is represented as being undertaken by GSI and not GSSL, and it was agreed between GSI and GSSL that this should be so. There is no clear pattern of correspondence between HMRC and its predecessors and individuals writing as GSSL employees from a GSSL office or address in Great Britain. I find that the correspondence is between GSI and HMRC. 

94	I therefore find that even if it would be adequate to establish that presence for the service of proceedings is an adequate form of presence to meet the test in regulation 119(1)(b) – an approach I do not accept – the evidence put forward does not show even on the balance of probabilities that GSSL could be served in Great Britain by reference to any identifiable location. 

The presence of individuals
95	If GSSL is not present by reference to any place, then it can be present only by reference to its servants or agents. A further strand of Mr Goldberg QC’s argument was that GSSL was present because one of its directors, Mr Housden, was present here. Here again I was faced with the limits imposed by this preliminary hearing. I was given little evidence about Mr Housden and none by him. I am prepared to accept that he had a role, in the English and Welsh company law sense, as a director of GSSL although I do not know what that role was beyond the resolutions I have seen. Even so, with only one exception brought to my attention, the documentary evidence shows that he did not correspond with others as a GSSL director but as a GSI director (in, I understand, the GS sense of director not the company law sense). That exception was a letter written on GSSL notepaper on 7 October 1999 by Mr Housden for and on behalf of GSSL. The headed notepaper gave an address in the British Virgin Islands, not in the United Kingdom. That does not take the issue forward.

96	I did not see Mr Housden’s contract of employment. Given the papers I have seen I have assumed in the absence of more specific evidence that he was one of the many individuals seconded by GSSL to GSI. If he did have a further contract directly with GSSL I have not seen it. If he did have specific duties in the United Kingdom for GSSL (rather than in New York, where GSSL’s central management and control was, or the British Virgin Islands, where it is registered) I was not told of them. The tax and related duties he undertook using a British address all appear, from the correspondence, to have been performed for GSI. This was so, as I have noted above, even when he was dealing with the tax and related affairs of GSSL. It is therefore not clear that there is any evidence that he was in any meaningful sense the presence of GSSL in London. Linked with that, although I am prepared to accept or assume that Mr Housden was in the United Kingdom for a significant part of his time, I was given no direct evidence of this or about whether he could be said to be here on the continuing basis noted as reflecting the obligations of a secondary contributor in each tax month or earnings period.

97	I say “the presence” because I was given details of no other individual who was contended to represent GSSL in the United Kingdom, or to provide his or her personal service to GSSL or act as GSSL’s agent. I therefore make the following findings of fact. First, I find that with the possible exception of Mr Housden I was given no significant evidence of any individual present in Great Britain whose presence here could be said to constitute in any way the presence of GSSL for the purposes of regulation 119(1)(b). Second, on the evidence before me I am not persuaded that on the balance of probabilities Mr Housden’s presence in Great Britain was sufficient of itself to constitute a presence in the United Kingdom of GSSL for current purposes even if I assume (as it has not been established in evidence) that he was actually present for a sufficient time in the United Kingdom in each earnings period and that I further assume (as again it has not been established in evidence) that he was actually authorised or charged with carrying out in Great Britain any duties for GSSL (rather than GSI, given the terms of the agreement between the companies set out above that I have seen, or more generally the GS group as a whole) of ensuring payroll compliance with the relevant NI contributions obligations. Without those assumptions, the evidence in my view falls far short of the evidence necessary to show presence of GSSL by his presence. 
 
General conclusion
98	GSSL is not incorporated in Great Britain, is not resident in Great Britain, and has no registered placed of business or registered address for service in Great Britain. In addition I have found as fact that:

(a)	GSSL has no place of business in Great Britain
(b)	more generally, it has no office or other specific location in Great Britain where it may be found, including places other than places of business
(c)	it has no identifiable address for service in Great Britain
(d)	it is not present by reference to its bank accounts and banking activities here
(e)	it is not present by reference to the activities of its employees here, as they are all seconded to others
(f)	it is not present by reference to the payroll and similar activities for its employees as they are performed by GSI
(g)	it is not shown to be present by reference to any individual director or other specific employee present in Great Britain.

99	The only conclusion that I can reach on these facts is that GSSL is not present here. It is therefore not within the scope of regulation 119(1)(b).
Is GSI the host employer?
100	This is the contention put forward in the decision and by Mr Gammie QC. I heard no argument about this from Mr Goldberg QC. His view appeared to be that the matter did not and could not arise. I have found it does arise. 

101	I have examined above the relevant provision in the Categorisation Regulations. I repeat the test as set out in [43] above. It refers to employment by a foreign employer as defined in those regulations (and set out above). If someone is employed by a foreign employer, the secondary contributor is deemed to be not that employer but the host employer where:

“(a) in pursuance of that employment the personal service
of the person employed is made available to a host employer; and

(b)  the personal service is rendered for the purposes of the business 
of that host employer; and

(c) the personal service for the host employer begins on or after
6th April 1994.”

102	On the basis of the findings I have made above, it follows that GSSL is a foreign employer for the purposes of those regulations. I so find.

103	The personal service of GSSL employees present in Great Britain was, largely but not entirely, made available to GSI. The services of some were made available to other GS group companies. On the assumptions I have made, the two named individuals against whom the section 8 decisions were made were seconded in this sense to GSI. They worked for GSI and not for GSSL. I have no evidence that, having been seconded to GSI, they did anything other than render personal service for the purposes of the business of GSI, and I so find. All the personal service relevant to these appeals took place after 6th April 1994. I so find.
Decision
104	In stating my decision, I repeat that this decision is made on a series of substantive and procedural assumptions. I have indicated that a final decision on the issue before me requires, if the parties dispute them and do not agree them, a series of findings of fact I am unable to make or do not make for reasons of fairness in the context of preliminary proceedings with only some of the parties present. 

105	On the basis set out above, my answer to the preliminary question is that I find as fact that GSSL was the foreign employer and that GSI was the host employer of the two named individuals throughout those parts of the period relevant to these appeals when GSI was not directly their employer.

DAVID WILLIAMS
TRIBUNAL JUDGE
RELEASE DATE: 26 April 2010