Its Plant-Tech Limited v The Commissioners for HMRC

Facts

ITS Plant-Tech Limited carries on a business providing inspection, testing, training and maintenance services in the wind technology and related sectors, employing some 20 to 30 workers during the relevant period. Until 2019 it ran its payroll in-house, but after the employee who performed that function became unavailable the directors considered outsourcing and were introduced to providers through a business contact. In or around early 2019 the company entered into arrangements first with MP Screeding Ltd and later with ITS Payroll Ltd, describing them informally as "TUPE" transfers of its workforce. No written contract between the appellant and either entity was produced. The payroll companies issued invoices charging VAT on gross wages, employers' National Insurance contributions and a processing fee of 1.5%, with the net wages the appellant paid directly to its workers credited against the invoices; the appellant reclaimed the VAT as input tax. HMRC opened enquiries in 2022 and on 19 July 2023 raised assessments under section 73 of VATA denying part of the input tax on the basis that the amounts were not payment for a taxable supply. On review, on 25 October 2023, the assessments stood at £32,226 for period 06/19 and £536,949 for periods 09/19 to 03/22, a total of £569,175. The company appealed to the First-tier Tribunal, the validity and timeliness of the assessments being undisputed.