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2012: Changes that Affected Contractors

This year was one of the most active and interesting for many a year in terms of tax issues that directly affected the contracting community. As 2012 draws to a close we thumb through the pages of the contractors’ tax diary as a reminder of 'that was the year that was'.

January

  • Following concerns raised by taxpayers and agents, HMRC agree to review Business Records Checks (BRC).
  • Chancellor abandons plans to scrap the additional 50% rate of tax.
  • Extension of the Alternative Dispute Resolution trial.
  • HMRC publishes answers to 13 common questions about the NIC treatment regarding disguised remuneration.
  • Reed Group loses appeal against HMRC's revocation of its expenses dispensation leaving it facing a tax bill of £158 million.

February

  • IR35 new approach pilot announced by IR35 Forum.
  • Freedom of Information request reveals the head of Student Loan Company, Ed Lester, is using a personal service company (PSC) to channel his £182K salary.
  • Temporary postponement of Business Records Checks announced by HMRC.
  • BBC newsreader and former face of HMRC advertising campaign, Moira Stuart, and  former Mayor of London, Ken Livingstone revealed to be 'contractors'.
  • After Simon Burns, former Health Minister, announces that no civil servants are paid via PSC's, it is later discovered that at least 25 personnel are engaged as freelancers under contracts worth more than £4 million.
  • Interpretation of what constitutes a mobile phone revised by HMRC to include smartphones and exempt them from being a benefit-in-kind.
  • Increase in homeworking allowance announced. Rate of £4 p/w effective from 06.04.12.
  • Office of Tax Simplification recommend rules to make disincorporation less tax prohibitive.

March

  • Budget announces that the Government will introduce a package of IR35 measures, to strengthen compliance teams and improve administration.
  • ESC C16 becomes legislation from 01.03.12 but limits distributions under an informal winding-up to £25K.
  • HMRC fixes charges on tax debt cases that end up in the County Court.

April

  • From 1st April virtually all businesses must file VAT returns electronically.
  • Business Tax Dashboard (BTD) launched that enables smaller businesses to view their business tax position.

May

  • New IR35 guidance published that includes business entity test and scenarios.
  • Treasury publish 'Review of the tax arrangements of public sector appointees' which reveals 2,400 off-payroll arrangements.
  • 'Taxation of Controlling Persons' consultation begins.
  • Employment Appeal Tribunal rule that former Stringfellows lap dancer was an employee and extends the application of mutuality of obligation.
  • Being part and parcel of an organisation not enough in itself to decide employment judge rules in First Tier Tax Tribunal in the case of Slush Puppie Ltd v HMRC.

June

  • General Anti-Abuse Rule (GAAR) consultation begins aimed at artificial and abusive tax avoidance.
  • Statutory Residence Test (SRT) consultation begins with a view to putting definition of UK residence on statute books.
  • Factsheet CC/FS17 released by HMRC setting out higher penalties for income tax and capital gains tax involving offshore matter.

July

  • Business Tax Dashboard upgraded to include VAT liabilities and penalties.
  • 'Lifting the Lid on Tax Avoidance' consultation begins, describing options for improving public information about tax avoidance schemes and the risks of using them.
  • IR35 Forum meeting indicates that HMRC's restructuring of IR35 compliance work has enabled an increase in number of reviews and an improvement in times to conclude reviews.

August

  • Adjudicators Report shows that complaints against HMRC on the increase.

September

  • New rules for public sector appointees come into force.
  • Real Time Information (RTI) facts published to enable businesses to get ready for change to PAYE reporting.
  • Employment Appeal Tribunal rule in the case of UK Mail Ltd v Creasey that being ignorant of a right of substitution does not diminish that right.

October

  • Freedom of Information request reveals that IR35 enquiries more than doubled to 59 in the year ended 5th April 2012.
  • BBC tells Public Accounts Committee it has reviewed 3,000 engagements involving the use of PSC's.
  • HMRC tell Public Accounts Committee it intends to increase the number of IR35 reviews tenfold in the next year.

November

  • PCG mistakenly claim that 2,000 new IR35 enquiries initiated since May but blame Abbey Tax for the error.
  • Business Records Checks re-launched.
  • BBC announces new status test for all freelance engagements.
  • National Audit Office report reveals that HMRC are not doing enough in the prevention of highly contrived tax avoidance schemes.

December

  • RTI penalties clarified.
  • Autumn Statement announces that 'Controlling Persons' proposals to be abandoned but IR35 legislation to be extended from 06.04.13 to catch 'office holders'. Also, there is to be a consultation on public procurement as part of the measures to tackle tax avoidance.
  • Statutory Residence Test guidance published.

So, quite an eventful year for contractors. Next year will probably give us an indication of how the new IR35 land lies in terms of the number of reviews HMRC has and will undertake, their general approach and success rate. In the meantime forget about IR35, enjoy the festive break and here's hoping that 2013 is a prosperous year for one and all.

 

By Andy Vessey

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