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All posts tagged HMRC

Self Assessment (SA) and Company Directors

HMRC has received inquiries about the law on the obligation to notify chargeability to tax. Guidance on Self Assessment tax returns has been updated on GOV.UK to clarify that company directors with income taxed at source and with no further tax to pay do not need to complete a tax return. Anyone chargeable to Income Tax or Capital Gains Tax must tell HMRC they are chargeable to tax if they have:
• not received a notice to file a return or
• received a notice to file a return and HMRC have agreed to withdraw the notice.
Information on how to do this is available on the Check if you need to send a Self Assessment tax return webpage on GOV.UK.
There are some exclusions. These include:
• individuals in receipt of a Simple Assessment (unless they are chargeable on anything that is not included in the assessment)
• individuals whose income has been taxed at source
• individuals not liable to the high-income child benefit charge.
Many company directors are taxed under PAYE and so will not need to give notice of liability to tax, provided they have no other untaxed income. HMRC can choose to issue a notice to file an SA return (under section 8 Taxes Management Act 1970) to any individual. Anyone receiving a notice to file a tax return must do so by the required deadline, or they may be liable to a late filing and/ or a late payment penalty.
If an individual has received a notice to file and has no other taxable income to report, they can ask for the notice to file to be withdrawn. However, HMRC may decide that they still require a return and if so, the return must be submitted otherwise, penalties may be incurred.

HMRC Complaints Process given passing grade

Following on from last years annual report that found HMRC’s customer services somewhat lacking. The report highlighted that over the course of the year, HMRC failed to answer approximately four million telephone calls. When the calls were answered, 14% of the calls took over 10 minutes to be answered and then a further 4 minutes before they were connected to a member of the team.

Because of this seemingly low standard of quality, it caused many to wonder if HMRC was ‘fit for purpose’. This has caused HMRC to more closely pay attention to its customer service, and they have commissioned Ipsos MORI to perform a report on their services to find areas that function well and those that don’t.

This report appears to highlight that HMRC is progressing in terms of customer satisfaction, with a generally accepted percentage of customers receiving the information and services that they required. One highlight of this report was the two main ‘motivations’ for complaints.

The motivations were separated into ‘active choice’ and ‘means to an end’, and these refer to why the customer would seek to make a complaint. An ‘active choice’ complaint is regarded as when “When customers made an active choice to complain they were usually dissatisfied with the HMRC service received and wanted to make a complaint to let this be known,” as per the report.

Whereas, a ‘means to an end’ complaint is described as “Where the complaint was made as a means to an end, customers were trying to resolve their issue and had exhausted all other options available to them. Making a complaint was felt to be a logical next step in the customer journey as they sought to understand how or why the initial issue had occurred or they were looking for a practical outcome, such as a change in tax code or reimbursement.”

This change and awareness of these different types of complaints can allow HMRC to more accurately handle the needs of the customer and should further improve the quality of service.

HMRC Recalculations: Recovery Effort

Rebecca Cave has explained how HMRC will begin to repair the 2016/17 income tax calculations for around 30,000 taxpayers. On the 13th of November, software developers received an email from HMRC’s Software Developers support team giving more detail.

This Email Contained the Following information:

– The “recovery exercise” will begin on 19 November 2018.
A total of 22 different exclusions that affected the calculations have been identified.
– Affected taxpayers should receive a new SA302 by the end of November.
– Copies will not be sent to agents.
– Penalties will not be applied and interest on underpayments will not be charged provided the additional tax is paid within 28 days of the date of the notice (in many cases the taxpayer will have been overcharged and so entitled to a repayment).
– Appeals against the amended SA302 (if appropriate) must be made within 30 days of the date of the notice.

The exclusion cases to be repaired in this recovery exercise have been listed as:

1) Non-UK resident – exclusions 57, 67 and 73:

57 – Relating to the 7.5% notional tax paid on UK Dividend income.
67 – Relating to the tax due on trust income.
73 – Relating to the loss claimed.

2) Beneficial ordering – exclusions 68, 69, 70, 72, 76, 78, 79, 82, 83 and 85:

Relating to how the personal allowance and/or reliefs are allocated to ensure the allocation is most beneficial to the customer.

3) Dividend tax credit, trust and Lloyds – exclusions 62 and 75:

Relating to the tax calculation to give the relief due on apportioned income.

4) Marriage allowance transfer (MAT) – exclusions 66 and 66A.

5) Capital gains not calculating – exclusions 64 and 77.

6) Chargeable event gains – exclusions 74 and 81:

Relating to the top-slicing relief that is due.

7) Pension lump sum – exclusion 87:

Relating to the tax due on your state pension lump sum.

The exclusions that will generate the greatest number of recovery cases are those listed above under beneficial ordering.

Chargeable events

Watch out for chargeable event gains. Exclusion 81 was agreed following my representations to HMRC (and my article last year in Taxation Magazine). But only very recently have HMRC (again at my behest) agreed to remove exclusion 80 and confirm that the HMRC calculation was after all correct.

You may need to check whether your tax return software incorrectly calculated tax because of exclusion 80 and as a result, the client overpaid for 2016/17.

HMRC prepares for possible No-Deal Brexit

 

HMRC recently published an updated version of their Partnership Pack on GOV.UK. This pack is designed to help businesses for the possibility of a ‘no-deal’ EU exit. This builds on the previous version of the pack, published in October, and includes additional information about trade at the border from departments across government.

The pack is for organisations, intermediaries and infrastructure providers to use for their own contingency planning and to share with those they represent, their clients and members. It is designed so that you can take information from it and tailor it to suit your own channels and your audiences’ needs.

The pack focuses on how VAT, Customs and Excise could be affected and includes information split by topic and audience,and also includes flowcharts.

Future editions of this pack will include additional information around policies that will impact trade at the border and we will update you when these are published.

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.

Taking Making Tax Digital seriously!

Recent reports show that 40% of businesses in the UK are still unaware of the Making Tax Digital (MTD) initiative. To give an idea of how many that is, there are 1.1 million businesses that this will affect. Meaning that 440,000 business are unaware of a major change in the UKs tax system, which is rapidly approaching.

There is around 6 months till MTD takes effect, meaning businesses need to start preparing for it now. But with so many businesses still unaware, many are looking at potential fines and penalties for improperly filing their tax. Many believe that this issue is being caused by HMRCs lack of communication around the issue. HMRC have been assuring that a campaign to inform all those affected by MTD should be starting soon, but is 6 months before the deadline going to prove to be too little, too late.

For more information on MTD, so you know whether this will affect you or not, go to Making Tax Digital.

Cloud Bookkeeper is now officially MTD ready!

 

Cloud Bookkeeper are now officially MTD ready!

With great thanks to Xero, we can now assist any and all with queries and questions regarding the upcoming changes to the UK tax system,
Please feel free to get in contact for all of your MTD needs.

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.

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.