Miss Mead Ali v HMRC – Tribunal Case TC01977 – Bank Transfers Were Not Income

HMRC had raised assessments in relation to the tax years 2002/03 – 2006/07, alleging that Miss Ali had underdeclared income.  This arose as a result of deposits made into her bank accounts for the years in question which HMRC asserted were income.

Income tax

(Photo credit: Alan Cleaver)

The appelent explained that the reason for the transactions was that money had been lent to members of her family who had then returned the funds to her.

The tribunal found that the burden of proof was on Miss Ali to show that the payments did not amount to income.  They found that she was a truthful and careful witness, and in particular noted that it was normal in the community of which Miss Ali is part for there to be communal use of bank accounts by family members, even to extended family.

The tribunal therefore allowed Miss Ali’s appeal as on the balance of probabilities they were satisfied that the deposits did not represent taxable income.

IR35 – New Tests for Personal Service Companies

IR35 TestsFollowing a review of the effectiveness of the IR35 rules, there is to be new guidance from HMRC including what is described as 12 business entity tests.

Points are allocated to each test and if a contractor scores less than 10 points there is a high chance of them being caught by IR35; if they score more than 20 points there is low risk.

 The headings for the tests are set out below:-

  • Business Premises Test
  • PII Test
  • Efficiency Test
  • Assistance Test
  • Advertising Test
  • Previous PAYE Test
  • Business Plan Test
  • Repair at Own Expense Test
  • Client Risk Test
  • Billing Test
  • Right of substitution test
  • Actual substitution Test

 For further advice regarding IR35 contact Eaves & Co on 0113 2443502

We’re Hiring!

Do you know anybody who would be interested in the opportunity to qualify as a tax advisor?  If so, then this role as a tax apprentice with our firm in the centre of Leeds could be just the start needed.

Eaves and Co are looking for a bright hard-working individual to join their growing team as a tax apprentice.  We are keen to attract candidates who would like a career in finance.  The role will start in an administrative capacity, but the right candidate may have the opportunity to be fully trained and sit both their ATT and CTA exams, leading to membership of CIOT.

What’s more if we do well, you do well – Eaves and Co like to reward their staff for the work they do, with trips, events and social evenings as a part of their culture.  We even have a five a side football team in the Leeds Law League.

After 12-24 months in an administrative capacity, the intention would be for the candidate to progress on to tax exams with full training (paid by Eaves and Co) support and encouragement given.

If you are interested in the role please email Diane Middleton.

Valantine v HMRC – Partnership or Not?

partnership agreement

(Photo credit: o5com)

The case of Mrs Pauline Valantine v HMRC (TC 01644) demonstrates that in certain cases it may be useful to engage in discussions/meetings with HM Revenue and Customs as this could prevent cases being taken to Tribunal unnecessarily.

The key issue in the case concerned whether Mrs Valantine was in partnership with her husband.  If Mr & Mrs Valantine were in partnership then Mrs Valantine would become liable for unpaid income tax/NICs on her share of the partnership profits and unpaid VAT for which she would be joint and severally liable.

The question of liability was particularly relevant because Mr Valantine was expected to declare bankruptcy, therefore if a partnership did not exist then Mrs Valantine would not be liable for the unpaid tax and HM Revenue and Customs could not expect to receive payment.

Based on the evidence before them the Tribunal found in favour of the taxpayer on the basis that the relationship between the taxpayers made it unthinkable that they would have entered a business partnership.

Interestingly however, the Tribunal concluded that HM Revenue and Customs should not be criticised for their handling of the case or for bringing the case to Tribunal.  They went on to say that had the taxpayers been willing to meet HM Revenue and Customs to discuss the case then the case may never had been brought to appeal.

Taxpayers involved with investigations/enquiries from HM Revenue and Customs may find professional advice useful to ensure that matters are concluded both quickly and robustly.

For information regarding our tax investigation/enquiry services please contact Paul Davison on 0113 244 3502 or visit our website www.eavesandco.co.uk

HMRC Argue for Self-Employment – T Coffey T/A Coffey Builders and Dr M Selvarajan (TC1888)

A recent First-tier Tribunal case was unusual in that HMRC were arguing for self-employment, whereas they would normally take cases to Tribunal arguing against self-employment, due to the extra National Insurance costs and less relief for expenses.

Yellow hard hat. Studio photography.

(Photo credit: Wikipedia)

Mr Coffey had been in partnership with his wife as a builder, but had retired through poor health. He claimed that he had been employed by Dr Selvarajan to supervise the refurbishment of the Doctor’s clinic.

Mr Coffey was paid a set weekly amount, regardless of hours worked. There was no written contract, no invoices were raised and there was no right of substitution.

The tribunal found that Mr Coffey had control over the building project. In the absence of a written contract, two documents were considered. The first was a document which Mr Coffey had signed which referred to him as, “principal contractor” and “planning supervisor”. The second was a note in his diary setting out the payments to contractors, which was held as evidence that Mr Coffey was in charge of these payments. Dr Selvarajan was still responsible for actually making these payments.

The tribunal also noted that there was a lack of financial risk, but that this was not “necessarily determinative”.

The Tribunal determined that Mr Coffey was self-employed, with one key indicator apparently being the fact that Mr Coffey had previously been a builder for a number of years and that he had not checked with his accountant how his new engagement would be taxable.

Whilst the outcome of this case, and the approach taken by HMRC, might be surprising, there may be some elements that could be used to build a case in favour of self-employment.