This was a case which concerned assessments for both underpaid output tax and over recovered input tax and penalties for inaccuracies in VAT returns. 

The central issue was whether the appellant supplied labour to its customers as HMRC contended, or outsourced administration services as the appellant contended. The amount of VAT and penalties assessed were in the region of £20m.  

Background 

The appellant company was the brainchild of Mr Purkiss, it was he who conceived its business model. Mr Purkiss had spotted that larger companies (i.e. those with significant number of employees) were far better placed to obtain benefits for its employees at a lower cost than employers with fewer employees. He thought that if he could aggregate employees from a number of employers under the appellant’s banner, it