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Self Employed Tax Cut Scrapped by Hammond

Plans for a tax cut for millions of self-employed workers have been scrapped by chancellor Phillip Hammond. This will cost those affected £130 a year, and those affected number around three million.

They have denied plans to abolish class 2 National Insurance Contributions for the self-employed, and in the words of John O’Connell is ‘letting down’ all those affected. Also saying that ‘High taxes on the self-employed discourages entrepreneurship and risk-taking.’ O’Connell has been making it clear that he opposes the scrapping of the plans, which were planned to have taken place in April. But obviously were delayed for a year, and was recently fully overturned with no sign or repeal in sight.

HMRC caught offside over referees

By Contractor Weekly

 

Tribunal rules football refs were self-employed

HMRC has lost another employment status case at the First-tier Tax Tribunal, this time involving football officials.

The Revenue had raised tax and NIC assessments on the Professional Game Match Officials Ltd (PGMOL) totalling nearly £584K for the two years ended 5th April 2016, on the basis that they considered football referees to be employed.

PGMOL

The PGMOL oversees the management and administration of refereeing in professional football and provides referees and match officials for games in the most significant football competitions such as the Premier League, FA Cup and the English Football League (Championship and Leagues 1 and 2). It has three members who fund the company; the Football Association (FA), the FA Premier League (Premier League) and the Football League, now referred to as the English Football League (EFL).

The FA is the governing body for English football, including all refs in England, and classifies them by reference to a number of different levels, ranging from International, and Level 1 (National List) to Level 9 (trainee referees). The PGMOL’s role relates primarily to referees at Level 1 and their appointments to matches.

A number of refs are employed under full-time contracts by the PGMOL and are referred to as ‘Select Group’ referees. These officials will primarily take charge of Premier League matches. Select Group refs are expected to do everything the PGMOL asks, including following training programmes, attending all meetings, ensuring that pre-match preparation is suitable, being available for appointments and even cancelling holidays.

This appeal concerned refs who refereed in their spare time alongside other full-time employments and who primarily officiated matches in the EFL and FA Cup. Their role was described as a hobby, albeit a very serious one. Refereeing is fitted in around other paid work, and it does not pay the bills. These refs are paid modest match fees and expenses by the home club, and not via the FA. In contrast to Select Group referees, National Group referees are, for example, not obliged to follow a particular training programme or attend training meetings and they have no obligation to accept match appointments.

Code of Practice 

Upon invitation to join the referees list, a ref is issued with a Code of Practice that states:

“you are not an employee of PGMOL and will be treated as being self-employed.”

Under ‘Appointments’ it is stated that these will be made by PGMOL, and that there is:

“no guarantee that Match Officials on the List will be offered any appointments to matches and Match Officials are not obliged to accept any appointments to matches offered to them.”

A number of points are listed under ‘Expectations’, all introduced by the words “Match Officials shall be expected to….”:

  • be readily and regularly available for appointment to matches;
  • reaching and maintaining a satisfactory level of fitness as determined by PGMOL;
  • undergo fitness testing and any other assessments in accordance with the Fitness Protocol;
  • observing and obeying the FA and competition rules and regulations; and
  • carrying out all instructions, procedures and directives relating to Match Officials issued by PGMOL.

The document also refers to “continuous monitoring” of performance with “individual appraisals being made when appropriate”.

Also mentioned is the training programme and coaching system stating that referees:

“will be required to attend meetings arranged by coaches at specific times throughout the season.”

PGMOL Code of Conduct

Compliance with this Code is a condition of being either an employee or a “self-employed contractor” and that bribery or corruption could result in dismissal of employees for gross misconduct or, for self-employed match participants, removal from the list.

Hospitality or gifts in excess of £50 in value must be recorded on the gift register without delay, and anything in excess of £100 requires prior approval by the General Manager.

Whole kit and caboodle

Match and training kit for National Group refs is provided by PGMOL, together with suits (to be worn to and from matches), ties with the PGMOL logo and overcoats. Assistant referees and Fourth Officials receive similar kit, so as to create the appearance of a professional team. Match kit is provided in four different colours with the ref choosing which set to wear on the day. However, National Group refs must supply their own boots and trainers, watches, cards and whistles. In practice, they also require their own computer, and many pay for gym subscriptions and heart monitors that are used to provide data to PGMOL’s sports scientists, as well as for other items such as Sky TV subscriptions, nutritional supplements and sports massages.

PGMOL loans the use of communication equipment to allow match officials to communicate.

Private medical insurance is offered to National Group refs by PGMOL, and in practice generally reimbursed the excess on claims. Additionally, PGMOL offers a heart screening programme and psychological support.

Match fees

Match fees and allowances are set by PGMOL. Payment of fees and expenses is not dependent on the production of an invoice by the ref. From 2015/16 onwards, it has been an automated process that follows from the submission of a post-match report by the ref and the entry of details of expenses via software called the Match Official Administration System (MOAS). Training attendance fees and expenses are paid in the same way. Prior to this, match expense claims for EFL matches were submitted directly to the home club using an ‘expenses claim’ form.

No substitutes

Referees who do not attend games for whatever reason do not get paid their match fee. Furthermore, the PGMOL may also cancel an appointment of one ref and replace him with another. In both these instances though, the substitution of an alternative ref would be a matter for PGMOL, not the referee.

Mutuality of obligation (MOO)

HMRC argued that the expectation of being offered work, resulting from the practice over a period of time, can constitute a legal obligation to provide some work or perform work provided. In this case, there was sufficient MOO between matches, but in any event the refs were in practice regularly offered, and regularly accepted, work throughout the season. The requirement in the Code of Practice to be readily and regularly available for appointment to matches was in practice more than an expectation.

The Tribunal did not agree. During the actual engagement, there would be some level of mutuality, namely for the ref to officiate as contemplated (unless he informed PGMOL that he could not) and for PGMOL to make payment for the work actually done. However, the Tribunal’s view was the discrete contract started when an individual match appointment was offered and accepted, and that even after acceptance the ref had the ability to withdraw from the engagement before he arrived at the ground, and that PGMOL was also able to cancel the appointments.

Control

According to HMRC, there was a sufficient degree of control exercised over referees. The practical realities of the relevant industry had to be taken into account, and all that was needed was a sufficient framework of control. The level of control exercised during matches was the same as for the Select Group, who were accepted as being employed. There was continual monitoring and assessment via the assessor and coaching system, and assessments fed into remuneration. The assessment system was no different to regular employee appraisals. Once a referee had indicated his availability on a particular date he had no ability to choose which match to officiate in. That was entirely at the discretion of PGMOL. PGMOL also had the ultimate right to sanction referees by suspending them from officiating, and imposed controls on off-pitch activity via the Code of Practice and Protocols.

Counsel for PGMOL however, argued that the control that existed was regulatory control rather than control resting with PGMOL, and that during engagements referees, like clergy, were beyond control.

The Tribunal agreed that the pre-season documents, including the fitness protocol, the Match Day Procedures document, and the Code of Conduct, imposed some obligations on referees which gave PGMOL elements of control. However, they were not persuaded that the assessment and coaching systems themselves provided further elements of control in respect of individual match appointments. This is advisory rather than controlling in nature. Similarly, the coaching system is very much a personal, one-to-one arrangement designed to support referees and assist them to develop to the best of their ability. A coach present at a match might offer advice at half time as well as before or after, but that is simply advice and not an indicator of control.

Although some referees suggested in HMRC’s interviews that they had no control over where they were sent for matches, Tribunal did not think that that was correct in a legal sense. They had the right not only to express geographical preferences on MOAS but also to refuse any particular appointment once it was offered, or even to back out later. This was not the sort of arrangement under which PGMOL could direct the referees about where to go or when to go there, or indeed what task to perform when they got there. In each case, the refs needed to agree to take on a particular task at a specified location, date and time. Referees clearly had to travel to the location to carry out the appointment, but that was determined by the nature of the task they had agreed to take on rather than by any form of control in an employment sense.

Whilst the Tribunal would not go as far as comparing referees to clergy, it was relevant to consider the nature of the role.

The Laws of the Game make it clear that the referee’s decision is final, and there was no suggestion that PGMOL could, for example, remove the ref at half time and replace him with another, or do anything more than offer coaching advice.

Overall, the Tribunal were not persuaded that PGMOL had a sufficient degree of control during the individual engagements to satisfy the test of an employment relationship. It did have a level of control outside match appointments as a consequence of the overarching contract. Although some of the obligations imposed by that contract applied to matches, there was no mechanism enabling PGMOL to exercise the corresponding rights during an engagement. In reality, the only sanction PGMOL could impose for failure to adhere to these commitments was not to offer further match appointments, and to suspend or remove the referee from the National Group list. If an issue emerged between a match appointment being made and the date of the match, then the most PGMOL could do in respect of that appointment was to cancel it. That is not an exercise of control during an engagement, but rather it is a termination of that particular contract.

The fact that there was some element of control did not automatically mean there was a contract of service (employment), as HMRC are so keen to argue.

Conclusion

There were some pointers towards employment such as:

  • level of integration;
  • hours worked;
  • referees were not in business on their own account; and
  • PGMOL was the refs only or primary paymaster

These however, were vastly outweighed by the fact that there was insufficient MOO and control, and therefore it was ruled that the refs were self-employed.

Yet another lesson for HMRC in MOO and control but don’t expect them to be swayed by common sense and logical argument any time soon.

The full judgment can be found here: PGMOL v HMRC.

 

This Article was written by Contractor Weekly.

Annexe or Enlargement?

The case of Roman Catholic Diocese of Westminster v HMRC (TC06692) related to a new church hall built at St Joseph Church in Stevenage, linked to an existing church building. The issue in dispute was whether the new hall was:

a)an ‘annexe’, ie an independent building capable of functioning in its own right, separate to the existing church (VAT Notice 708, para 3.2.6);
b) or an enlargement or extension to the existing church.

The Diocese (a charity) had assumed that a) applied and it was correct to issue a VAT certificate to the builder to confirm that this was the case. HMRC believed that b) applied, in which case the builder’s services would be standard rated.

After much deliberation, the tribunal allowed the appeal and looked at the before and after of the building post completion of the works, and concluded that structures were different. Therefore qualifying as an annexe.

Tips for these kinds of disputes:

1. Always focus on the approach of the judge, who I felt really cut through the finer detail and looked at the bigger picture. He said he examined “the physical characters of the building as it was, and as it is after completion of the works.”

2. Ensure that the new building will function independently from existing buildings. The new church hall even had separate heating thermostats and boiler controls.

3. Don’t be afraid to ask for a ruling from HMRC – the charity unit is much more accommodating in giving written VAT rulings than for a commercial business. There is an online form headed: “Charities and VAT – Enquiry form for Charities” which can be completed and submitted and then you get an email reply with a decision.

First Unexplained Wealth Order Case Will Continue

Justice Supperstone has dismissed an attempt by ‘Mrs A’, who we cannot name for legal reasons, to strike off the application for two Unexplained Wealth Orders (UWO). These UWOs were filed by the National Crime Agency (NCA).

A UWO allows government agencies such as NCA and HMRC to investigate assets aquired by those who do not appear to possess sufficient income. This is an attempt to staunch the flow of ‘illicit’ money into the UK, and came in with the Criminal Finances Act 2017.

Mrs A is the first reciepient of one of these UWOs, and has received two at once. The UWOs are to investigate two properties that Mrs A has funded and purchased in South East England. The two properties were valued at around £22m.

“We’re delighted that this investigation will continue and unexplained wealth orders are proving to be a valuable tool in the fight against corruption,” said Transparency Internationals UK director of policy Duncan Hames. “This decision to hold this hearing in public is a welcome step that should reassure the public that action is being taken against dirty money in our economy.”

To date this is the only known case involving UWOs. The respondent has seven days to appeal this ruling.

Companies House’s 8 most bizarre excuses for late accounts

All of us have given and heard our fair share of excuses in our lifetime, whether it was not completing homework or just needing that day off from work. In business, excuses can be fairly commonplace, but for Companies House these eight took the cake for why business’ did not file their accounts.

Companies House revealed a list of the most ridiculous reasons given by companies filing late, from business’ being too successful to awkward spousal encounters. This list was revealed to raise awareness of late filing and the risk of penalty fines attached. They have warned business that penalties for late filing will double if filing is late for two years in a row.

Companies House’s List Goes as follows:

8. My Company was more successful that anticipated, so I was too busy to file the accounts.
7. It was Valentines Day.
6. Slugs ate my accounts.
5. A Volcano erupted and prevented me from filing.
4. We delivered the accounts to the betting office next door to Companies House
3. Pirates stole my accounts
2. I Found my wife in the bath with my accountant

And if you thought those were absurd, Companies House’s most bizarre excuse was:

1. Goats ate my accounts.

Now, as much as these are amusing. The very real issue of not filing your accounts to Companies House, is still a major issue. There is no excuse for not filing and failing to do so, will most likely incur a fine. Repeated failure will only make those fines worse, considering that the penalties double after two consecutive years of late filing.

So make sure you file and watch out for slugs, goats and pirates, who want to get their hands (or mouths) on your accounts.

Get GDPR Ready – Acquisition and Sharing of Information

GDPR (General Data Protection Regulation) was released and brought into effect in the UK on the 25th of May 2018, and there is still much confusion what it entails even now months down the line. This entry will attempt to clear some of that confusion up.

GDPR means that all practices and organisations are ‘Data controllers’, which mean they have a duty to limit the amount of infomation collected about induviduals based on the what is needed for any given purpose, this is true for both prospective and active clients. For example if you were creating a mailing list for prospective clients, there are many thing that you will and will not need to create this list. Simplified all you may need is their contact information and their name, in some cases the aspect of your business they are interested in. However you are unlikely to need their NI number (National Insurance).

So when aquring information, the nescessary information to be collected needs to be carefully assessed, so as to only collect that which is required to perform any given action. Once this information is collected you also need to evaluate who amongst your organsiation needs access to it. For example your marketing department doesn’t need access to the clients personal information. This is the main goal of GDPR, to limit the amount of information being accessed by those that have no need of it.

It is understandable how many are confused by the rules of GDPR, but a good rule of thumb when evaluating the nescessary information is to ask these following questions:

– Do we need this information?
– If so, do we need it now or later?
– Who needs to access this information?
– Why?
– Can they perform their role with access to only part of this data?

These questions should make it easier to understand what level of information is required and who should be given access to how much of the gathered information.

This process is also not a one time only affair, these rules need to be taken into account each and everytime there is a change within your organisation. For example each new employee will need to be brieffed on how the information you hold is handled and why they are done in that way. And any changes to this method will need to be updated to the existing members of your organisation.

You are also responisble for the security of any and all information that you collect, and in collecting this information you are agreeing to control who has access to it. So take care that all data you collect is carefully protected.

Whilst online platforms have made great strides to secure data about living individuals, they are not all equal in their security standards. And however great your platform may be, if your people don’t use it securely you cannot be sure the information is safely held.

Sharing passwords with colleagues, using one password across multiple platforms, and giving people higher levels of access than they need are all still common issues across many firms. While the software and the hardware can be, and is being improved, the human ‘wetware’ is struggling to keep up. Poor data handling by people is still the biggest risk to data security.

Six Months From MTD, HMRCs Communications Campaign

With the deadline of April 2019 getting ever closer, HMRC have been critised on the lack of education or guidance with regards to the upcoming changes to the tax system, though many professionals in the accounting and bookkeeping field hailing MTD (Making Tax Digital) as a step in the right direction.

Many still worry, however that they is still too large of a knowledge gap surrounding MTD, even for those in the accounting profession itself. A recent survey performed by the ICAEW was released highlighting that over 40% of businesses that will be affected by the new changes are unaware of said changes and therefore could be instore for some serious ramifications.

In an effort to allay some of these concerns and ensure everyone who need be aware of these changes are; HMRC have begun work on a communications campaign to shed light on all the new facets of the MTD programme, starting with a tweet on the 19th of September 2018, linking to a web page “Making Tax Digital: how VAT businesses and other VAT entities can get ready.” 

A HMRC spokesperson has said “We are starting to ramp up communication activity with businesses, initially with information to help them prepare for MTD and later how they can sign-up for the service.”, and while this page that has been linked doesn’t contain any new or previously unreleased information about MTD it does contain some simplified guidance about those it may affect and how to keep up to date with the changes that will be coming in to effect.

For more information about the MTD initiative, follow this link:

IR35 Rules – Are you Employed or Self-Employed

Introduced back on the 6th of April 2000, the IR35 rules were put in place to combat tax avoidance, specifcally targeting workers withing the IT industry, though not limited to a single industry. In fact these rules could apply to any worker that provides their services through a personal service company or other form of intermediary.

Before attempting to decide whether or not these rules may affect you and your business, below we will discuss the conditions that must be met to consider yourself either Employed or Self-Employed;

According to HMRC you are an Employee if:

– You are required to work regularly unless on leave (e.g. holiday, sick leave, maternity/paternity, shared parental leave.)
– You are required to do a minimum number of hours, and expect to be paid for the time you work.
– A manager or Supervisor is responsible for your workload, deciding when and how work should be completed.
– Someone else cannot be sent to do your work.
– The business deducts tax and NI (National Insurance) Contributions from your wages.
– You recieve holiday pay
– You are entitled to statutory sick pay and maternity or paternity pay.
– You can join the business’s pension scheme.
– The business’s disciplinary and grievance procedures apply to you.
– You work at the business premises or at an address specified by the business.
– Your contract sets out a redundancy procedure.
– The business provides the materials, tools and equipment for their work.
– You only work for the business, or if you have another job, it is completely different from your work within the business.
– Your contract, statement of terms and conditions or offer letter (which may be described as an ‘employment contract’) use terms like ‘employer’ and ‘employee’.

If you can answer ‘yes’ to most of the conditions above, despite an intermediary, it is likely that there is an underlying employee to employer relationship in place and therefore triggers the application of the IR35 Ruleset, the reverse is also true, if the answer to most of these conditions was ‘no’ then it is likely that there is no such relations ship and therefore the IR35 do not apply.

According to HMRC you are Self-Employed if:

– You are in business for you/yourselves and are responsible for the success or failure of your business and can make a profit or a loss;
– You can decide what work you do and when, where or how it is completed.
– You can hire someone to perform the work.
– You are responsible for fixing unsatisfactory work in your own time.
– You agree a fixed price for your work with your engager – it doesn’t depend on how long it takes them to perform the job.
– You use your own money to buy business assets, cover running costs and provide the tools and equipment that is necessary.
– You can work for more that one client.

When attempting to remain outside the rules as governed by IR35, specifically when using an intermediary, the relationship should be structured as per the rules above.

Therefore whenever working through intermediaries to remain self-employed ensure that you fully understand the differences between the relationships with your client and yourself, else the IR35 rules may apply to you and result in unforseen charges.

Tourist Tax plans – “Illogical” says Hospitality Chief

 

Chancellor Hammond has been urged to do away with plans for an upcoming tourist tax, this new tax entails adding a local surcharge of at least £1 to all hotel bills, a move which is being heavily contested by UK Hospitality Chief Exec. Kate Nicholls.

Mrs Nicholls has written to Hammond, displaying her opposition to such a bill, one exerpt from the letter reads as such, “I am writing to convey our profound opposition to such a policy and our sincere concern over the impact any additional taxation would wreak on an already-strained and over-burdened sector,” this draft was seen by The Daily Telegraph.

This new initiative was brought to discussion earlier this year as local councils were seeking new ways to increase their income against “Increasingly stretched local finances.” Popular tourist destinations Bath and Oxford have revealed plans earlier this year to introduce a similar tax after reports from last December that Birmingham will put a £2 levy on vistors to the 2022 Commonwealth Games.

Nicholls has described these plans saying “This is inequitable and Illogical,” and calling that they would “create bizzare incentives” for tourists to become ‘day-trippers’ rather than long stays, thereby damaging the tourism of the UK.

Others are also standing in opposition of this new plan, with Mike Cherry, Chairman of the Federation of Small Businesses, said “Our visitor economy is a huge success story, contributing more than £125bn to the economy annually and providing vast tax receipts to pay for public services.”.

The Model Office and New Technology

 

The Model Office for those that are unaware, as the are possibly the opposite of what you would expect from a ‘Tax office’, they are a fairly new addition being established only 18 months ago. The goal is explore new technologies and develop ways that they can be used to help customers in thier various taxation needs. And with the ever evolving state of the technological world that is by no means a small feat.

One the focuses for the Model Office currently is the addition of the rising popularity of home voice systems, for example Alexa, Amazons home voice system. The purpose of many home voice systems like Alexa are allow users to provide quick and easy access to internet services, like music and internet searches, but this can be adapted to many things.

The Model Office has examined the main reasons for customers calling HMRC last year and have grouped and built these reasons into an Alexa ‘skill’. This skill means that when customers say to their Alexa, “Alexa, open HMRC” they will then be asked a series of questions by the device and dependant on the answers given, they will be directed down the most suitable route to have their queries answered. In some cases the user will also be asked if they would like an SMS message containing a link to the relevant guidance from the GOV.UK website.

It is good to see new technology being implemented in ways that seem to be genuinely useful for those less versed on the intricacies of taxation law.