Accounting Blog

Employment Taxes updates – October 2011

Employment Taxes updates – October 2011

–      Two First Tier Tribunal cases on employment tax status

–      A reversal for Total People Ltd in the Upper Tribunal (lnvolving NIC refunds on car allowances)

–      New HMRC guidance on visits to the UK where employees are seconded on full time contract abroad

lan Mitchell v HMRC (2011) UKFTT172

The case involved a hospital surgeon, Dr lan Mitchell, who was assisting another surgeon in private practice. A contract for services was drawn up on the basis that the assisting surgeon was self-employed. HMRC maintained that he was an employee of the senior surgeon because, although the contract allowed for a substitute to be used, this was not likely in practice, and the assisting surgeon followed the senior surgeon’s instructions, and had to be available at specified times of treatment. The Tribunal disagreed, using the three established tests which state that for a worker to be an employee, they must be:

  1. providing a personal service, and
  2. be under sufficient control of the other, and
  3. other contractual factors should be consistent with a contract of employment.

The Tribunal concluded that, although the first test was satisfied, and this was accepted by the taxpayer, the other two tests were not proven and, in the circumstances, decided that the intention of the parties would be the determining factor and upheld the appeal that the surgeon was self-employed.

Paul Anthony Bell v Revenue & Customs (2011) UKFTT 379 (TC) TC01234

This case was rather unusual in that the taxpayer was a self-employed construction worker who maintained he was an employee in order to claim compensation for an accident at work. Although there was no recorded evidence of the accident, the case hinged on whether or not he was an employed worker. He worked set hours and was told what to do each morning by his line manager, Nevertheless, the Tribunal concluded that he was self-employed as it was a common feature of self-employed construction workers that they moved from one site to another following instructions and this was often the only they could obtain work.

National insurance contributions on car allowances HMRC v Total People Ltd

HM Revenue & Customs have successfully overturned a First Tier Tribunal decision from August 2010 that business motoring allowances paid to staff were exempt from National lnsurance Contributions. The Tribunal concluded that car allowances paid were correctly subjected to NIC and as such no refund was due. The tribunal found that the car allowance payments were not of “relevant motoring expenditure” and hence not eligible to be disregarded as NIC earnings. It is not known at this stage whether the taxpayer will appeal the decision but, in the meantime employers who are paying

a car allowance and a reduced car mileage allowance may be better off by reducing the car allowance and paying the maximum mileage allowance.

 Employees sent abroad on a contract of full time employment

 HMRC have now clarified their position in relation to employees sent abroad to work. lt remains the case that an employee working wholly abroad on a fulltime contract of employment will be regarded as not resident in the UK throughout the period spent working abroad. Some confusion has existed, however, over how many days the employee could return to the UK during that period without affecting the residence position. HMRC has now confirmed their view that an employee must not carry out more than nine days substantive duties in the UK in the tax year otherwise they will be regarded as remaining resident here. Returning to the UK for merely for reporting purposes or for attending a training course will not be considered as substantive but attending a directors’ board meeting will.

Please note, the contents of this bulletin do not represent advice and professional advice should always be sought before taking any action. 

Thank you to John Hill & Associates (employment tax specialists) for commenting on some recent topical employment tax issues.

John Hill & Associates

40 Edenhurst Drive


L37 2LH

+44(0)1704 870148

07753 294 763


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