UK Residency under Scrutiny

The matter of UK residency is a common thread in the tax tribunal and courts over recent times.

The Gaines-Cooper case continues to be the main showpeice in relation to UK nationals leaving our shores.

However, professional advisors assisting overseas nationals coming to the UK should consider the case of Tuczka. Which has just been heard by the Upper Tribunal in favour of HMRC.

Tax residency remains a complex area and we will be glad to assist on 0113 2443502

IR35: Contractor Wins

HMRC assessed Elaine Richardson who worked via ECR Consulting Ltd for £50,000 under IR35.

The case went to tribunal where three tests were applied; mutuality of obligation, substitution and control to determine the nature of her working relationship.

In deliberating, the tribunal made the following observations about ECR:

  • It operated from a dedicated business area at her home
  • It has company a domain and website
  • It advertises its services and is a member of the Professional Contractors Group
  • There are retained reserves and invested in business development
  • Over the years ECR has taken on fixed price work for a variety of clients.

The tribunal judges concluded, “it is clear to us that ECR is a genuine business and therefore not a target of the IR35 legislation”.

From this case it is clear that IR35 is still being pursued by HMRC, and freelance arrangements must have a clear commercial trading rationale behind them.

If you have any queries about how IR35 applies to you or are thinking about going freelance, please get in touch on Leeds (0113 2443502).

HMRC Business Records Checks

HM Revenue & Customs (HMRC) have begun trialling Business Records Checks (BRCs) for small and medium businesses.  The purpose of these checks according to HMRC is “to improve the record-keeping procedures of small and medium business customers”.

HMRC have stated that they will not charge penalties for record keeping failures during the trial.

It is clear that HMRC believe that records are not being adequately kept and will likely come down on this in the future.  Now would therefore be an ideal time to ensure that businesses’ records are in order.

We feel that records for the payments of dividends is an area of weakness typically for owner managed business.  If you would like assistance with this please call our Leeds office on 0113 2443502

Missing Trader Intra Community (MTIC) Fraud – Be vigilent

HM Revenue and Customs have recently published new guidance on how traders can spot MTIC fraud.

The guidance is available to download from the HM Revenue and Customs website at: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&propertyType=document&columns=1&id=HMCE_PROD1_025808

This type of VAT fraud is migrating into all sorts of different product sectors and therefore any business buying and selling goods should be extra vigilant

Where HM Revenue and Customs believe that a trader knew or should have known that transactions were involved in VAT fraud they may refuse claims for input VAT on those transactions, which could be very costly for a business.

Please contact Eaves & Co if you require any advice to protect against MTIC fraud in your business or assistance in demonstrating to HM Revenue and Customs that you are an innocent trader, if you are already in extended verification.

Self Employed or Employed

 When deciding on whether an individual is employed or self-employed the Courts look at several ’employment indicators’.

These are used to gain an indication of an individual’s employment status.  They include the right to substitution, level of control, use of own equipment and several more.  

In a recent tribunal case it was contested as to whether a Doctor was self-employed or employed when undertaking practice work.  The tribunal found that applying these indicators proved to be inconclusive.

Both parties involved believed that the arrangement was one of self-employment and a contract was drawn up as such. The tribunal stated as the case was ‘borderline’ this should be taken into account. The taxpayers appeal was upheld and he was deemed to be self-employed.  

An individuals employment status is a complex area. If you would like advice with regard to your employment status  why not get in touch.

Legal Professional Privilege for Accountants

In October 2010, the Court of Appeal judged that legal professional privilege should not be extended to accountants and would only apply to qualified lawyers.  The case is Prudential v HMRC.

However The Supreme Court has now granted leave for an appeal to be made against the Court of Appeal’s decision, which is somewhat unexpected. 

The case could have a significant impact on the documents which HMRC are able to attain from accountants in tax investigation cases.