In Petrol Service Limited v HMRC [2018] TC06907 the FTT found that 'self employed' consultancy fees paid to the company’s directors were taxable employment income in respect of their directorships.

  • The company ‘PSL’ ran two petrol stations.
  • It had two directors and no other staff or employees.
  • The shop at the stations was sublet and the tenant of the shop pays rent and collects the payments for the petrol on behalf of PSL. Another operator sub-lets the car wash.
  • Each director ran their own consulting company in parallel to PSL and each consulting company had a consultancy contract with PSL. This arrangement allowed the directors to share their income with their spouses who were also shareholders in their consulting companies.
  • PSL claimed tax relief for the cost of these consultancy services.
  • The directors had very old service/consultancy contracts that related to another period in the business' life.
  • The directors carried out all of the services to conduct PSL’s businsess, working 20-40 hours per week.

HMRC argued that the activities performed by the individuals amount to the day to day running of the business.

It issued determinations under Regulation 80 and s8 for PAYE and NICs in respect of consultancy fees paid between 2009-10 to 2014-15

  • PSL appealed. 

The company's appeal involved running through the employment status tests as well as arguing that the directors were non-executives and did not require a service contract.

The FTT found that the directors conducted all of the activities that were conducted by the Appellant and concluded, looking at all the evidence, that neither had an independent consultancy business

When viewed realistically, as no services were provided by the Consultants other than those provided by the directors of the Appellants, the payments should be regarded as having been an award for the services as director of the Appellant.


The fact that the directors run the business on their own without any staff meant that it was very difficult to argue that their 'consultancy' fees were for anything other than running the company. 

The FTT noted that 'some tax has been paid by the consultancy vehicles' and the respective wives and that it 'would hope and expect HMRC to avoid any double taxation that might arise if there are no extant enquiries into any relevant returns for the periods in question.' 

Useful guides

Regulation 80 and 72 determinations for PAYE
When HMRC can assess a company or its owners for failure to deduct PAYE and NICs

Directors Service contracts: tip tips
What do you put in a service contract? Do you need one? Can it double as an employment contract?

Tax planning for directors 
Suite of topical guides for all directors

External links

Petrol Service Limited v HMRC [2018] TC06907

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