Goralczyk v Revenue & Customs [2010] UKFTT 390 (TC) (19 August 2010)

DECISION

The issue

1. This case concerns whether the Appellant is entitled to Statutory Maternity Pay ("SMP) from her employer Industrial Temps Limited ("ITL"). The appeal is brought against a decision ("the disputed decision") made on 28 October 2008 by Mr Steve Duke, an officer of the Board of HM Revenue and Customs, under Article 7 of the Social Security Contributions (Transfer of Functions, etc)(Northern Ireland) Order 1999 that the Appellant is not entitled to SMP.

2. It is agreed that the entitlement to SMP in this case is dependant upon the Appellant having been employed by ITL for a continuous period of at least 26 weeks continuing into her "qualifying week" ("QW"). It was agreed that in this case the QW started on 23 December 2007. Initially there had been some confusion over the date on which the QW started but that it started on 23 December 2007 was not in dispute by the time of this hearing. HMRC accepted ITL's contention that the Appellant ceased employment with them on 16 December 2007 and the disputed decision follows from this.

3. The Appellant contends that her employment ceased on 28 December 2007. If the Appellant can show that her employment ceased on 28 December then her appeal will be successful. The employee is required to have been under a contract of service for one day only in the QW (or indeed in any of the other 25 weeks) for it to count as a whole week for continuous employment purposes. It is agreed that the Appellant satisfied all the other conditions attaching to qualification for SMP and so the only issue is the end date of her employment with ITL.

The facts

4. We established the facts from the documents provided to us and the oral evidence of the Appellant and of Mr Steve Duke, officer with HMRC. We found the Appellant a clear and helpful witness; despite having the services of a translator available at the hearing she was able for most of the time to present the facts without his assistance and to answer questions. She seemed to have a good recollection of events. We also found Mr Duke a clear and helpful witness. We did not hear any evidence from ITL nor did we hear evidence from Mr Ferguson of Country Kitchen where the Appellant worked as an agency worker for her employer ITL.

5. The Appellant was employed by ITL as an agency worker and worked for Country Kitchen throughout her period of employment. This business consisted of a small bakery and restaurants run by a Mr Ferguson. Two female employees made cakes and four male employees and the Appellant, together with Mr Ferguson, made bread. The Appellant started work at 4 a.m. which she found particularly demanding as her pregnancy progressed.

6. ITL had an office at Lisburn which was a short walk from the bakery. Although ITL also had an office in Belfast which seemed to handle much of the book keeping and administrative work the Appellant dealt on a day to day basis with the Lisburn office and in particular she consulted with them about holiday arrangements. There were a number of staff at the Lisburn office and the Appellant spoke to a number of different individuals; there was no single person dealing with enquiries or holiday arrangements.

7. The Appellant agreed her working hours with Mr Ferguson in principle and consulted him if she wished to take a holiday to see if the dates would be convenient for him. The hours she actually worked at the bakery were evidenced by a clocking in system which recorded her time and ITL used this time clock record in calculating her wages which they paid. When she wanted to take a holiday the Appellant asked ITL in Lisburn for a record of the number of days holiday to which she was by then due, consulted with Mr Ferguson whether the dates she proposed would be convenient and then informed the Lisburn ITL office of her holiday plans and agreed the arrangements with them so that they would pay her for those days which would otherwise not be recorded since the clock system only revealed hours that she worked on the Country Kitchen premises. The only exception to this arrangement for holidays was when she took a couple of days unpaid leave with the sole agreement of Mr Ferguson; as it was unpaid leave she did not see any requirement to tell ITL about it and of course she was not paid by them for the days in question since it was evident from the clock records that she had not been working.

8. In November 2007 the Appellant enquired what number of paid days of holiday she was entitled to for the year and established that she had 11 days due to her. She agreed with the local ITL office that she would take these days on 10, 11, 12, 17, 18, 19, 20, 21, 24, 27 and 28 December 2007. She was quite clear that she agreed this with ITL at the Lisburn office; indeed she told us she "signed" for this holiday but did not ask for a copy of what she remembers signing and says that she spoke to at least three different people in the Lisburn office about leave arrangements and cannot recall the name of the person to whom she spoke on that occasion. Sometimes the officers at Lisburn had to refer to their Belfast office and an example of this occurred when she was not paid for 10, 11 and 12 December when she took this as holiday as agreed. After her employment ended the Appellant did speak to the Belfast office direct and her contact there was a Lisa McMahon to whom, for example, she spoke about her P45 which she did not receive. Linette White, who wrote the original letter confirming her employment dates was also in the ITL Belfast office.

9. At the time the Appellant discussed her holiday arrangements with ITL she told us that she did not discuss the ending of her employment with them. It was not clear to us when this subject was discussed but we accept that it was not at the time that she agreed her holiday plans with them. Obviously the end date of her employment was discussed when the Appellant approached ITL for SMP payments. The Appellant was initially told by ITL that she was not entitled to SMP and the reason given by them at that stage was that her QW started on 30 December 2007. If her QW had started on that date the Appellant agrees that she would not have been entitled to SMP since she contends that the last day of her employment was 28 December 2007.

10. The Appellant drew ITL's attention to their mistake in calculating the date of the QW but did not make any progress in discussing this with them and so she applied instead to the Social Security Agency for Maternity Allowance. In her application form for this dated 8 February 2008 the Appellant stated that her leaving date was 28 December 2007, correctly stated that her QW started on 23 December 2007 and raised the question whether she was in fact entitled to SMP stating that Lisa McMahon at ITL had referred her to the Agency. The Social Security Agency sent a letter of enquiry to ITL at their Belfast office on 1 March 2008 asking them to confirm the leaving date. ITL replied by undated letter (recorded as received by the Agency on 12 March 2008) that the Appellant had worked for ITL from 30 April 2007 to 30 December 2007; this letter was addressed "To whom it may concern" and was signed by Linette White described as "Payroll Administrator".

11. The exchange of correspondence between the Agency and ITL led to an enquiry whether the Appellant was or was not entitled to SMP which was referred to HMRC who wrote both to ITL at their Belfast office, addressed to "Lisa", and to the Appellant. Questionnaire forms for completion were enclosed with both letters. The Appellant completed her questionnaire in which she stated her start and end dates for her ITL employment and recorded these as 28 April 2007 and 28 December 2007 respectively. ITL completed their questionnaire showing an end date of 16 December 2007 and this was signed by Lisa McMahon (described as "Payroll Manager") on 22 April 2008. HMRC informally told ITL by letter on 28 April 2008 that the Appellant was entitled to SMP notwithstanding the 16 December 2007 end date shown on their completed questionnaire. They based this on dates supplied by Linette White in her "To whom it may concern" letter and by the Appellant in her questionnaire. Lisa McMahon of ITL replied on 28 April enclosing a payroll history for the Appellant showing that she received holiday pay in her QW and explaining the confusion on the basis that Linette White "had not looked into the case clear enough". HMRC replied to that letter in a letter dated 8 April (but which must in fact have been written later than that since it refers to an ITL letter of 2 May) raising further queries about the end date shown on the questionnaire and asking why it differed from the end date supplied by Linette White and which also conflicted with "tax system records" held by HMRC showing an end date of 30 December. ITL were asked by the Agency for further information to support the earlier end date of 16 December and it seems that a copy of Form P45 was supplied showing an end date of 16 December. As a result of these enquiries a formal decision was made and communicated to ITL in a letter dated 29 July 2008 (the "first formal decision") written by Mr Steve Duke. The first formal decision was that the Appellant was entitled to SMP. The 29 July letter explained the basis of this decision. This was that the QW started on 23 December 2007 and ITL had previously confirmed that the Appellant did not cease working for ITL until 30 December 2007. Further, ITL had also confirmed that the Appellant had received holiday pay for weeks 38 and 39 and that week 39 ended on 30 December 2007. The 29 July letter suggested it was unlikely that, if her employment had ended on 16 December rather than on 30 December, she would have received accrued holiday pay in two separate payments over the next two weeks which the records show as having occurred and which ITL did not dispute.

12. ITL appealed from the first formal decision on 7 August 2008 in a letter written this time by Emma-Louise Forsythe, described as "Group HR Manager". The letter explained that the Appellant had asked for holiday payments to be spread over a two week period and attached a copy of the payroll history as well as a brief note dated 7 August 2008 signed both on behalf of Country Kitchen and ITL stating that the Appellant left Country Kitchen on 16 December 2007 and made herself unavailable for work with them and with ITL. HMRC wrote further to the Appellant on 16 September stating that they had received an appeal from ITL from the first formal decision. HMRC summarised the grounds of the appeal and particularly the new evidence from ITL in the form of the letter from Country Kitchen and ITL stating she made herself unavailable for work with either of them on 16 December. Mr Duke asked the Appellant for evidence that this was not so and warned her if she did not reply by 30 September HMRC would issue a varied decision stating she was not entitled to SMP and informing the Social Security Agency accordingly so they could continue to process the claim for Maternity Allowance. The Appellant responded on 14 October 2008 complaining that she had been given very little time to respond to HMRC compared with the time ITL had taken to appeal from the first formal decision which was in any case outside the usual 30 day limit for an appeal. In response to the substantive matters she expressed surprise that it had taken ITL so long to produce written confirmation from Country Kitchen about the end date as well as explaining that she would not have asked for holiday payment to be spread over a subsequent two week period if in fact she intended to leave on 16 December. She stated in that letter that she intended to take her holiday entitlement on 10, 11, 12 December and on 17, 18, 19 20, 21, 24, 27 and 28 December and that these dates were set in the ITL Lisburn office. She stated that she had never received a Form P45 despite being told by ITL that it had been posted twice to her address in February and April 2008.

13. On 28 October 2008 HMRC wrote to the Appellant dealing first with the complaint about timing. In that letter Mr Duke explained that ITL had been allowed to appeal out of time on the basis of their explanation that they had submitted an appeal within the thirty days which had not been received by HMRC. Since they had tried to appeal within the thirty days but it had not been received by HMRC they were permitted to resubmit it. In dealing with the appeal itself Mr Duke varied the first formal decision and decided that the Appellant's employment ceased on 16 December 2007 with the result that the Appellant was not entitled to SMP. He based his decision on the ITL statement that the holiday payments were spread over two weeks at the request of the Appellant, the signed statement Appellant had made herself unavailable for work for Country Kitchen and for ITL from 16 December and the P45 copy provided by ITL showing a leaving date of 16 December as well as the end of year Forms P11 also showing that the Appellant had left on that date. On 20 November the Appellant appealed against this second, varied, formal decision.

Submissions

14. The Appellant's submissions are simple. She says that she was entitled to paid holiday leave which she agreed with ITL she would take on 10, 11, 12, 17, 18, 19, 20, 21, 24, 27 and 28 December 2007. She decided to leave and not return after her holiday as she was finding the work too hard in her condition, despite having tried reduced hours (as evidenced by the payroll records) before her holidays. She says she did not discuss leaving her employment with them when she agreed those arrangements and that, if she had agreed to leave her employment with them on 16 December as they have stated in correspondence with HMRC, she would not have asked for her holiday pay to be spread over a two week period. She says that the first statement from ITL to HMRC by Linette White about her end date conflicted with the later statement from Lisa McMahon, that HMRC records available at the time the enquiry started showed that she was still employed in the QW, that the payroll history was not conclusive either way but certainly showed payments in the QW, that she had never received a Form P45 despite asking for it on several occasions and that the statement signed in August 2008 by Country Kitchen and ITL stating that she made herself unavailable to either of them from 16 December 2007 was simply not correct if it was intended to demonstrate that she intended to leave ITL’s employment on that day. She told us that she regularly received payslips by post from ITL and was most surprised that the P45 was lost in the post on two occasions when she was not conscious of other ITL correspondence (or indeed any other correspondence) being mislaid in this way.

15. As we did not hear directly from ITL or from Country Kitchen we were reliant, in considering the Appellant’s submissions, on the documents provided to us and information provided to us by HMRC explaining the basis on which the disputed decision was reached. It was plain that, by the time the Social Security Agency referred the matter to HMRC, ITL considered that the Appellant’s employment ceased on 16 December and that the holiday pay was spread over the following two weeks at the request of the Appellant and that their initial statement that the employment ceased on 30 December was written carelessly. There was no explanation why records held within HMRC also showed that the employment ceased on that date but those documents conflicted with later evidence submitted to HMRC (including the copy P45 and end of year forms P11) showing an end date of 16 December. Mr Duke did not add to the reasons he gave in his letter for reaching the disputed decision that the Appellant's employment with ITL ended on 16 December so that she was not entitled to SMP. He confirmed that he varied his first formal decision as a result of new evidence being mainly the August 2008 statement that the Appellant had made herself unavailable for work for Country Kitchen and for ITL from 16 December which was signed both by ITL and Country Kitchen and the absence of anything else from the Appellant to show that this was wrong. He also took into account the P45 and P11. He was aware of the Appellant’s arguments that the absence was a result of paid holiday leave and not because she had left her ITL employment and that she said she had never received the Form P45.

The decision

16. It is unfortunate that we did not have the opportunity to hear evidence from ITL or from Country Kitchen. We did find the Appellant clear and straightforward. We found her evidence convincing. We were persuaded by her statement that if she had decided to leave her employment on 16 December she would have asked for her holiday pay to be paid to her immediately. There is evidence of confusion within the ITL organisation shown by the contradictory statements about her leaving dates. We can see how the confusion arose if holiday arrangements were made with the Lisburn office but we can see no reason to prefer their later statements over the evidence of the Appellant and, indeed, can see how the arrangements may have been miscommunicated between the ITL offices. Both ITL statements about the leaving dates were made by personnel within the Belfast offices whereas the arrangements were made with the Lisburn offices. The August statement signed by ITL and Country Kitchen appears to have been prepared by the ITL office. It was signed by Country Kitchen but it merely stated that the Appellant made herself unavailable to Country Kitchen from 16 December and, read literally, this statement is as consistent with the Appellant being on holiday from that date as with her having left her employment with ITL. As we did not have the opportunity of hearing from Country Kitchen we were not able to enquire of them what they understood the statement to mean.

17. We understand that Mr Duke had not the benefit of hearing all that the Appellant was able to tell us about the history of this matter. We can see that he was persuaded by the evidence he had before him.

18. We listened carefully to the evidence of the Appellant. We considered the various and conflicting documents, and in particular the document written by Linette White soon after the commencement of the enquiry. We believe that the Appellant did not receive a form P45 despite asking for it on several occasions and we find it unusual that the same document should have been lost twice in the post. We took into account that the ITL appeal against the first formal decision also did not arrive at the offices of HMRC on the occasion it was sent by them. This added to our impression that ITL was rather disorganised in procedural matters; and that there may have been confusion about the arrangements the Appellant made with one of their offices. By way of contrast the Appellant seemed entirely clear about what had happened. We preferred her account that she arranged to take her paid holiday entitlement on the days she stated and that her employment therefore did not end on 16 December but continued during that holiday period and, crucially, continued into the QW. Accordingly we allow the appeal.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

MISS J M POWELL

TRIBUNAL JUDGE
Release Date: 19 August 2010

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS Respondents

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Goralczyk v Revenue & Customs [2010] UKFTT 390 (TC) (19 August 2010) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00672.html Cite as: [2010] UKFTT 390 (TC)