Dog-handler agency case wins appeal on contractor-costs point

A security company that supplied specialist dog-handlers to venues including Fulham and Wimbledon has won permission to appeal on a single narrow groundNationalarchives that could reshape the reach of the agency-worker rules. In Tyler Security Limited v HMRC [2026] UKUT 383 (TCC)Nationalarchives, decided on reconsideration at an oral hearing on 21 September 2026, Judge Mark Baldwin refused permission on all six grounds the company originally advancedNationalarchives but granted it on a new point of the judge's own raisingNationalarchives: whether section 44(1)(a) of the Income Tax (Earnings and Pensions) Act 2003 covers arrangements where the contractor bears material costs of providing something beyond personal labour — here, maintaining a certified search dogNationalarchives. The decision was signed on 10 October 2026 and issued to the parties on 13 October 2026.

The underlying dispute concerns a regulation 80 determination of £133,615.60 (reduced on review to £88,503.70) for the 2017-18 tax year, raised on the basis that the agency legislation in sections 44 to 47 of ITEPA applied to dog-handlers the company supplied to end-clients. The First-tier Tribunal dismissed the company's appeal in a decision released on 16 October 2025, refused permission to appeal on 6 February 2026, and the Upper Tribunal refused permission on the papers on 22 June 2026 before this reconsideration under the Tribunal Procedure (Upper Tribunal) Rules 2008.

On the pleaded grounds the judge sided with HMRC throughoutNationalarchives. Dog-handlers on site with their dogs, interpreting the animals' reactions and communicating findings, personally provide services within section 44(1)(a), and the VAT registration of the contractors as suppliers of dog-detection services does not displace that analysis: the income-tax and VAT regimes are separate, and section 44 exists precisely to bring into employment tax people not otherwise within it. Nor does self-employment help, since only remuneration already taxed as employment income escapes under section 44(2)(b). On supervision, direction and control, the First-tier Tribunal's factual findings — standard operating procedures, client tasking sheets, venue protocols, dress codes, inductions and on-the-ground supervision — amply supported its conclusion that section 44(2)(a) did not exclude the arrangements.

The judge also endorsed a procedural lesson for litigators: an appellant that wants to challenge whether a regulation 80 determination was made to HMRC's best judgment must plead that point expressly in its grounds of appeal or seek permission to amend. HMRC had flagged the omission repeatedly before the hearing, and the tribunal held that HMRC may be taken to have discharged its burden where the point is never raised, citing Kingston Maurward College, Allpay and Fairford Group on the unfairness of trial by ambush.

The granted ground is different. The judge became concerned that a self-employed handler with substantial dog-related costs — food, training, veterinary care and insurance — might end up materially worse off than a handler with no agency engagements or a single employment, because employment-expense deductions under the general rule are narrow and home-to-work travel between engagements would generally be non-deductible ordinary commuting. If those costs prove non-deductible, that may point to section 44(1)(a) covering only arrangements that are little more than the provision of time, labour and effortNationalarchives. The appeal court will now examine how deductible the handlers' costs are and whether that narrows the provision's scope. For agencies engaging contractors who supply costly equipment, animals or materials alongside their labour, the outcome matters well beyond security dogs.

Legal basis: Tyler Security Limited v HMRC [2026] UKUT 383 (TCC), applying sections 44 to 47 of the Income Tax (Earnings and Pensions) Act 2003 and regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003.