Employment Tax Expert

HMRC have issued an apology noting that the turnaround times for newly self-employed people to register will increase to eight weeks, between now and October 31 2010.

It seems that processing times for paper form 64-8 and registrations for self-assessment will also increase over the next two months.

HMRC staff are being moved to “higher priority work”, hence the delays in processing these forms.

Be very careful during this time to ensure that you are genuinely self employed, whether it be in the construction industry or elsewhere – if in doubt contact us today

Anyone who has a debt with HMRC, whether it be from a Tax Investigation, employer compliance review, employment status review, PAYE/NIC/CIS or Self Assessment you need to take heed of what is happening regarding HMRC debt collection agents.

To begin with, those out in the field are now not allowed to contact HMRC offices to validate the debts that they are being asked to collect. Why you may ask, well there are two very different reasons:
1.The support teams back at base do not have the time to take phone calls – this is the official explanation; or 2. That HMRC is preparing the ground for this work to be given to private debt collection agencies (The Budget announced that a further £500m of debt will be handed over to private agencies). These private agencies, will obviously not be able to phone up HMRC offices and ask for details from confidential records.

HMRC have conducted a bizarre pilot scheme to test whether going down the route of private debt collection agencies would work. Think really bizarre and then carry on reading …

The agencies were given a tranche of work to do, and a control tranche was left with HMRC teams (but was left completely untouched).

and the result, that’s right, the debt collection agencies won!

Fast forward to reality and it will be no surprise that over half of the debts that HMRC debt collectors are given to chase up are in fact incorrect but rather than the onus being on HMRC to prove the debt, these collectors are told that if they are challenged by a “customer” the onus is on the “customer” to prove that HMRC are wrong, which is morally wrong and goes against our judicial system of innocent until proven guilty. So imagine what it’s going to be like with private agencies

All herald the end of IR35, the complex and utterly futile attempt at raising extra revenue by re categorising self employed individuals as deemed employees – not quite! Although the Small Business Minister, Mark Frisk said in an interview with the Daily Telegraph that “Individuals selling their services through small companies have their taxable income policed by the so-called IR35 legislation.This will now be abolished. We want to make sure that we could undertake a comprehensive review of small business taxation in a way that makes the need for the current IR35 legislation redundant.But we want to make sure whatever we change is a lasting settlement. One of the problems with IR35 is that it’s a constantly changing set of rules.”

However, no sooner had he made this statement than people behind the scenes were scurrying around stating that he had NOT said it would be abolished. Now I like plain speaking so when I hear “This will now be abolished” I don’t think there are many areas of confusion but here we go again spin, retraction, review, consultation these are now what those immortal 5 words actually mean, so watch this space because no one who is self employed is off the hook

So in an effort to simplify the tax position of self employed individuals, the Coalition has announced that they are to review IR35, which in theory is good news. Far too much time and money has been taken up with HMRC pursuing employment status reviews that have led absolutely no where. The latest case being that of Novasoft – it only took a mere 8 years to resolve and guess how it started – readers of this blog will as this employment tax expert has warned about it since it began – that helpful little offer by HMRC to review self employed contracts free of charge. All those people who think they can get something for nothing take heed – this whole case stemmed from an unsuspecting person naively thinking that this was the route to go because of course HMRC are completely impartial aren’t they?
Well a mega lesson has been learnt here – the individual may have finally won but it cost him £’000′s and 8 years of his life – a high price to pay, so where do we go from here – well just be very careful reviews are planned, timescale not mentioned and even worse HMRC are carrying on blindly opening tax investigations into new IR35 cases so if you are concerned about your employment status contact the experts because you don’t want to be the next statistic

Announcing that you have a cunning plan to avoid Employers NIC is one thing, telling the world it has HMRC approval is another thing altogether but this is the latest idea by TMS for commission-only  individuals. Now it strikes this employment tax expert that if you were coming out making bold statments regarding guaranteeing someones self employed status that you would cover your bases and realise there is more to employment status than just a contract and trying to ensure that both parties stick to it – we all know what clients are like in practice, something happens from a commercial perspective, so the nature of the relationship changes, do they immediately ring to chat through the contract!!!

So if we are looking at a red rag to a bull from HMRC’s perspective, what will make it even worse:

• Converting existing employees to self employed under this scheme – employment status is not a matter of choice, it is based on the FACTS of the relationship
• Stating that they have received approval on a pilot case – HMRC do not and will not give blanket approval for contracts, it is down to the working practices of each individual case and they will look at them be assured of that (see the comment below from an HMRC spokesman)
• Marketing it so openly and blatantly as cutting payroll overheads and increasing the earnings of the individual  – many would suggest that they are walking the tightrope of planned tax avoidance and we all know HMRC’s views on “agents” using these methods

So where does this leave potentially naive clients – right in the firing line – how much would you pay to be well and truly on HMRC’s radar courtesy of all the publicity? Brace yourselves for some really interesting employer tax compliance visits or tax investigations now that HMRC are well and truly “involved”

And finally,

An HMRC spokesperson said: “HMRC does not give approval to specific business models. In some circumstances, we do provide advice on the tax and National Insurance implications of arrangements when asked to do so. In such circumstances, we look at the facts surrounding that particular example, but as circumstances vary, HMRC would not give that model approval.”