A recent First-tier Tribunal decision — Tyler Security Limited (TSL) v HMRC — has provided rare judicial commentary on the supervision, direction or control (SDC) test under Sections 44–47 ITEPA. With reforms to the umbrella company market on the horizon, the judgment is a timely reminder that SDC assessments are complex, fact-heavy and under growing scrutiny.
While the ruling carries limited precedent value, it offers valuable themes for businesses assessing their own Sec.44 exposure. The tribunal ultimately dismissed the appeal of TSL, who are a security company, supplying dog handlers to clients. The tribunal found clear evidence that the SDC rules applied. For BITA members operating across supply chains where self-employment, contract labour or outsourced services feature, the lessons are important.
1. Calling it a “service” won’t shield you from Sec.44
TSL argued it was providing dog-detection services — not labour — and therefore fell outside Sec.44. The tribunal disagreed, finding that the economic reality was the supply of operatives, not a standalone service.
“Labels don’t win cases,” notes Mark Taylor, Founder & Director at Chartergate Legal Services. “Tribunals look at substance and documentation, not how a supply is branded.”
Takeaway for BITA members: Terminology won’t save a weak arrangement — the paperwork and facts must align.
2. Tribunals will cast the net wide
The tribunal examined far more than just the contracts. Invoices, protocols, briefings, H&S paperwork, booking schedules and witness evidence were all brought into play.
“Too many businesses stop at the contract,” says Shyam Pattanit, Director at Chartergate. “TSL shows tribunals will pull every available thread — and if you haven’t pressure-tested your full document set, you’re exposed.”
Takeaway: A robust SDC review means looking at the entire contractual and operational chain, not isolated documents.
3. Practical reality matters just as much as paper
Even though the documentation showed clear rights of SDC, the tribunal still analysed day-to-day working practices, including how operatives were monitored, instructed and managed on the ground.
“If the practical working environment tells a different story to the contract, the tribunal will side with reality every time,” adds Shyam.
Takeaway: An SDC assessment must include real-world practices, not just written terms.
4. The burden of proof sits squarely on the taxpayer
One interesting feature of the judgment was how little time the tribunal spent distinguishing what constituted “the manner” of services. Regardless, the ruling reinforces a key principle: the taxpayer must demonstrate the absence of SDC.
“Sec.44 requires HMRC to start from the assumption that SDC exists — and the taxpayer has to unpick that,” explains Mark. “If you want to argue a point, you need evidence and clear positioning from day one.”
Takeaway: Prepare your evidence early — the tribunal won’t do the heavy lifting for you.
5. Skills and experience don’t automatically remove SDC
TSL highlighted that its operatives were skilled and specialised. The tribunal did not accept this as a decisive factor.
“Being highly skilled doesn’t mean you’re free from supervision or control,” notes Mark. “Businesses relying on skill level alone to justify self-employment are taking real risks.”
Takeaway: Avoid blanket decisions based on skill levels or pay rates — SDC assessments must be detailed and specific.
6. Sec.44 assessments must centre on Sec.44
TSL attempted to rely on VAT and employment rights legislation to argue it was not an “agency.” The tribunal rejected this approach and focused strictly on the wording within Sections 44–47.
“The Tribunal found that cross-legislation arguments didn’t carry significant weight when faced with the clear wording of Sec.44,” says Shyam. “The tribunal repeatedly pulled the case back to the statute itself.”
Takeaway: Use other legislation cautiously — for SDC, Sec.44 is the anchor.
7. Regulatory cooperation is strengthening
This case stemmed from TSL attempting to maintain SIA accreditation, which required workers to be taxed as employees. When TSL disagreed, HMRC stepped in.
“HMRC and regulators are increasingly coordinated,” warns Mark. “BITA members should expect more joint scrutiny, especially as the Fair Work Agency becomes fully operational.”
Takeaway: Compliance issues in one area can quickly spread into others — silos are disappearing.
What This Means for BITA Members
With labour supply chains under heightened scrutiny and further reforms approaching, businesses cannot rely on assumptions or historical practices. The TSL case underlines that:
- SDC assessments must be fact-driven and fully documented
- Operational reality carries real weight
- Evidence and preparation are critical in any HMRC interaction
- Regulators are coordinating more than ever
Chartergate Legal Services are here to support BITA members in navigating the challenges of Sec.44, SDC testing and wider employment tax compliance. For those looking to strengthen their arrangements, reduce risk or review current practices, expert guidance is invaluable.
Written by Mark Taylor
Director: Chartersgate
