In Tyler Security Limited v HMRC [2025] TC09663, the First Tier Tribunal (FTT) found that the agency rules applied to dog handlers being supplied through a third-party.
Tyler Security Limited (TSL), incorporated in 2007, provided specialist search detection services for its end-clients at venues and events.
- TSL became an Approved Contractor Scheme (ACS) with the Security Industry Authority (SIA) in March 2014.
- TSL did not maintain a workforce or own or maintain detection dogs or transport. It subcontracted its dog detection services to specialist businesses.
- Under contracts with its clients, TSL agreed to supply search dog operatives and their dogs. Fees were calculated based on the number of dog handler teams and hours worked.
- During the relevant period (2017-18), TSL engaged 33 dog handlers under 'self-employed' contracts.
- Handlers were required to hold National Association of Security Dog Users (NASDU) Level 3 and/or NASDU Level 4 qualifications and maintain annual accreditation for themselves and their dogs. They also needed SIA licences.
- Handlers personally attended venues, followed site-specific health and safety rules, and were integral to the service provided.
- If a loss was caused by a dog handler, it was TSL's insurance against which a claim would be made. The dog handlers had their own insurance, but it did not cover matters such as a missed explosive or a dog biting a member of the public at a venue.
- TSL had a disciplinary procedure in place for the dog handlers.
- TSL also provided the handlers with two months of initial training, which they paid for, and provided further periodic training. This was part of the NASDU licensing process.
- The handler and the dog operated as a team: it was not possible for someone else to carry out searches with the handler's dog, or vice versa.
- TSL issued job sheets specifying location, timing, and requirements.
- The dog handlers followed the directions of the end-client as to what kinds of searches to carry out and where to do them.
- Search advisers, in the hierarchical command structure at the venues, directed the handlers to the tasks they were specifically required to perform and to whom the handlers reported.
- Handlers invoiced TSL for hours worked.
- TSL did not operate PAYE for these handlers.
Following an educational due diligence meeting on 10 September 2020, HMRC advised TSL that the Agency legislation applied and that handlers should be treated as employees for tax purposes.
- After previously agreeing to run payroll in respect of the dog handlers, on 9 July 2021, TSL confirmed it would not be complying with the agency legislation following advice from its solicitors that, in their opinion, TSL was not an agency.
- On 1 February 2022, given that TSL has not applied the agency legislation, a compliance check was opened.
- On 11 March 2022, HMRC issued a Determination under regulation 80 of the PAYE Regulations for £133,616 (reduced to £88,507 following review).
The agency rules apply if:
- An individual personally provides services to a client.
- There is a contract between the client and an agency.
- Under, or in consequence of, that contract, services are provided or the client provides consideration for those services.
The legislation does not apply if the worker is not subject to, or to the right of, Supervision, Direction and Control (SDC) by any person.
- TSL Appealed to the First Tier Tribunal (FTT).
- HMRC argued that handlers were subject to SDC by TSL and/or TSL's clients; they controlled dress codes, health and safety compliance, task allocation, and protocols.
- TSL argued that:
- Handlers did not personally provide services; they supplied a composite service (dog plus handler), which goes beyond labour.
- Some handlers were VAT-registered and HMRC accepted that they made a standard-rated supply of services.
- They did not supply workers; they supplied dog-detection services, so they are not an agency.
- Services were not subject to SDC; handlers operated independently and exercised professional judgement.
- Handlers were in business on their own account, bearing the costs of training and dog maintenance.
The FTT found that:
- There was a contract between TSL and its clients, and services were provided under that contract for consideration, so conditions 2 and 3 of the agency rules were met.
- Handlers did personally provide services, so condition 1 was also satisfied. The dogs were 'equipment' and the handlers' skills and judgment were essential to providing the service. The dog could not, itself, decide where, how or what to search, or respond to the end-client's orders without the dog handler.
- SDC was present. Evidence showed:
- Clients controlled the tasks being performed, briefings and dress codes.
- Handlers followed client protocols and assignment instructions.
- TSL retained disciplinary powers and provided training.
- Both TSL and its clients had the right to direct and supervise work.
- VAT registration and composite supply arguments were irrelevant to the agency rules.
The agency rules applied. Payments to handlers were deemed employment income, and TSL was responsible for PAYE.
The appeal was dismissed.
Useful guides on this topic
Agency Workers: Employment intermediaries rules (subscribers)
What are the tax rules for Employment Intermediaries and Agencies? Are agency workers subject to PAYE?
Recovery of PAYE: Regulation 80 and 72 assessments for PAYE
When can HMRC assess an employer or an employee for unpaid Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs)? What is a regulation 80 determination? What is a regulation 72 determination? Who is assessed and what are the conditions?
Supervision, Direction or Control (SDC)
What do Supervision, Direction and Control mean? Why are they significant in terms of employment status, agency workers and tax relief on expenses?
How to appeal an HMRC decision
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