2013: How Was It For You?

A look back at a year in tax

Another Christmas over, Big Ben prepares to usher in 2014 and we all turn our thoughts to those New Year’s resolutions that are so well intended but seldom stuck to! So as we turn the corner into 2014 there’s just time to thumb through a contractors’ tax diary.

January

• Court of Appeal conclude that Nadine Quashie, former Stringfellows lap dancer, was self-employed, thwarting her claim for unfair dismissal. A lack of mutuality of obligation (MOO), economic risk and the intention of both parties to create a self-employed relationship were enough to point towards a contract for services. Full story.
• A Freedom of Information request reveals that Managed Service Company (MSC) enquiries rose sharply from 2012. As at April 2012 the number of live MSC enquiries stood at 216 but this soon increased to 860 by November of that year.

February

• According to HMRC, a record number 9.61 million people filed their 2012 tax returns on time, with thousands taking the opportunity to file over the festive period. Full story.
• HMRC confirm at a meeting of the IR35 Forum that it is on course to hit 230 IR35 enquiries by March 2013. Full story.

March

• The Budget cements the amendment to the IR35 legislation by including ‘office holders’ but HMRC fail to deliver any substantial guidance. Full story.
• A self-employed sales lead generator for a window company successfully persuades a First Tier Tax Tribunal that he was an employee. Mr Yetis was something of a hybrid worker but the requirement for personal service, an absence of a commercial relationship and that both the company and Mr Yetis appeared to regard the relationship as one of employment tipped the balance in favour of employment. Full story.
• Tax and accounting group, Bloomsbury Professional, obtain data that reveals IR35 enquiries tripled in the first half of tax year 2012/13, from 59 in 2011/12 to 193 in the first six months of 2012/13.

April

• Mrs Mandip Ranu, a locum solicitor, failed to convince an Employment Appeal Tribunal (EAT) that she was an employee of a solicitors practice. Although MOO and control were present in the working relationship to some degree, the judge found that Ranu was neither an employee or an independent contractor but rather a worker for the purposes of the Employment Rights Act 1996. Full story.
• Contractors paying themselves a ‘one off’ salary payment each year told that they do not have to complete monthly nil payment notification under Real Time Information (RTI) provided they tell HMRC. Full story.
• P A Holdings decide not to appeal the Court of Appeal decision that their contrived employee bonus scheme, whereby employees were paid in dividends, did not avoid tax. This settles the doubt that genuine dividends declared by contractors would be challenged by HMRC and the Revenue reassure freelancers that the department will not take such action. Full story.
• The settlements legislation, commonly referred to as S.660A, rears its head as Mr Bingham, a solicitor, is held to be taxable on bank interest earmarked for his wife and children, by the First Tier Tax Tribunal. Full story.

May

• A full political cross-party letter calls for the Chancellor to reverse the retrospective application of legislation by Budget Note 66 (BN66). BN66 was announced in March 2008 to stop the abuse of double taxation agreements, particularly by tax avoidance scheme promoters. Full story.
• Following the introduction of a new statutory residence test in the previous month, HMRC pilot an online ‘DIY’ residency tool to help individuals decide their residency status. Full story.
• Another MSC Freedom of Information request reveals that 981 debt transfer notices are issued by HMRC in the year ended 5th April 2013 in an attempt to recover debts of nearly £1.5 million. This represents a huge increase from the previous tax year when none were issued! Full story.

June

• HMRC consult over Offshore Employment Intermediaries as they seek to tackle the problem of the use of offshore employers of workers based in the UK to avoid NIC and employment taxes. Full story.
• A fourth specialist IR35 team is added by HMRC in Bradford. Full story.

July

• Following a Public Bill Committee review, retrospective legislation, commonly referred to as BN66, remains. Full story.
• Department for Business, Innovation and Skills, publish a consultation document titled, ‘Transparency and Trust:  enhancing the transparency of UK company ownership and increasing trust in UK business – discussion paper.’, that could signal the end of the Annual Return. Full story.

August

• The Single Compliance Process (SCP) is trialled successfully by HMRC causing them to roll it out for small and medium-size enterprises. Enquiries are found to be less onerous under SCP. Full story.
• HMRC publish ‘Tempted by Tax Avoidance’ – A warning for people thinking about avoidance schemes’. Full story.
• Office of Tax Simplification recommend changes to the benefit and expenses rules in their interim report, ‘Review of employee benefits and expenses:  Interim report.’ Full story.

September

• The Alternative Dispute Resolution (ADR), a new way of resolving disputes with HMRC, becomes permanent. Full story.
• More freelancers who participated in offshore tax avoidance schemes start to receive tax assessments from the Revenue, each demanding thousands of pounds. Full story.
• The right of control is emphasised by an EAT in the case of White & Todd v Troutbeck SA, despite substantial day-to-day responsibility being delegated to the workers. Full story.

October

• A record number of outstanding Tax Tribunal cases is created by unresolved tax disputes. In 2012/13 there were 27,000 outstanding First Tier Tax Tribunal cases, double the number in 2009/10. Full story.
• HMRC introduce cheaper 0300 helpline numbers. Full story.
• NIC Employment Allowance expected to benefit 1.25 million businesses who will see their NIC bills reduced by £2,000 from April 2014. Full story.
• IR35 Forum Minutes reveal that IR35 Helpline is unpopular, with only 80 requests being made for opinions on contracts in the year ended 31st March 2013. Full story.

November

• BBC role out their own employment status test in an attempt to appease the Public Accounts Committee’s criticism of it by allowing top flight presenters to ‘avoid tax’ by using PSCs. Full story.
• A Scottish court rules that an offshore tax avoidance scheme used by FTSE 100 listed Aberdeen Asset Management is subject to tax, leaving the company facing a £7 million tax bill. The decision is a further hammer blow to those involved in schemes that employ the use of EBTs. Full story.
• Figures published indicate that HMRC is winning the war on tax avoidance, as the number of reported schemes under the Disclosure of Tax Avoidance Schemes (DOTA) legislation declines. Full story.

December

• House of Lords Select Committee set up to consider the consequences of the use of PSCs for tax and NIC. Whilst the committee conduct public hearings of oral evidence with HMRC and professional and industry bodies, it also seeks written evidence from anyone with an interest. Full story.
• Autumn Statement announces that the Agency Legislation will be amended, as from April 2014, to tackle disguised employment. Whilst the purpose is to prevent employment intermediaries from ‘dressing up’ workers as self-employed, there is some doubt as to whether PSC’s will be affected. Clarification should arrive once the consultation period ends in early February 2014. Full story.
• Employers with 9 or fewer employees will be given more time to report PAYE information, under RTI, on or before the last payday in the tax month, until April 2016. Full story.
• An offshore tax avoidance scheme marketed by Consulting Overseas is defeated by the First Tier Tax Tribunal. Philip Boyle, an IT contractor who used the scheme, lost his appeal that foreign exchange loans made to him were not employment income. Full story.

Here’s hoping that 2014 is a successful and prosperous one for all our readers. Happy New Year!