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14th Annual HR & Payroll Conference 2008 - 5 March to 8 March 2008
Here are some details of our 14th Annual HR & Payroll Conference 2008, to be held at 18th Century Heythrop Park Hotel, Golf & Country Club, at Enstone near Chipping Norton, Oxfordshire, on the edge of the Cotswolds.
(For you X-Factor fans it was where the recent boot-camp was held for the 200 or so 'hopefuls' - we were considering renaming the Conference the 'taX-Factor')
The dates are Wednesday 5th March to Saturday 8th March 2008 but see please see page 6 of the downloadable PDF brochure for three different options.
Included in Conference price:
- 48 different workshop modules to choose from
- 4 key plenary sessions
- 12 key modules repeated
- 3 breakfast discussion groups
- 'by request' and 'one-to-one' sessions
- 3 nights accommodation
- Breakfast, lunch and evening meal
- Friday evening 'end of conference ball'
- Use of leisure facilities
We look forward to welcoming both new and past attendees to what is regarded by many as 'simply the best' conference for HR and Payroll.
For downloadable PDF brochure and booking form:
http://www.hrdps.co.uk/conference2008.pdf |
News Items – at 15th January 2008
The Income Tax (Earnings and Pensions) Act 2003 defines special rules (“IR35” rules) that apply when a worker provides services to a client under a contract between an intermediary and the client in circumstances where, if the contract had been between the worker and the client, the client would have had to treat the worker as an employee for tax purposes.
A recent decision of the Special Commissioners, Datagate Services Ltd v HM Revenue & Customs, illustrates this situation. Datagate is a limited company providing computer consultancy services. Mr. Barnett is the sole director and shareholder of Datagate. In January 2001, Datagate entered into a contract with a project company under which Datagate would supply the services of Mr. Barnett to a MBDA, a developer of missile systems. The contract continued until September 2004.
Although Mr. Barnett was not an employee in fact, HMRC subsequently decided that the hypothetical “IR35” rules applied to this contract on the basis that the working relationship between Mr. Barnett and MBDA was such that, if the contract had been directly between them, it would have been a contract of employment and MBDA would have been obliged pay him through the payroll, deducting tax and NICs. HMRC assessed Datagate as owing £28,774 in tax and £17,482 in Class 1 NICs in respect of the three tax years in question. Datagate appealed against the assessment and, in a decision given on 20 December 2007, the Special Commissioners allowed the appeal.
Employment status, i.e. whether or not a person is an employee for tax and employment law purposes, is decided on an overall view of a number of work-related factors. The process is known as “picture-painting” because a status decision has to be made by “standing back and looking at the picture as a whole”, without giving undue weight to particular factors.
HMRC argued that, if the contract had been made directly with Mr. Barnett, it would have been a contract of employment because, among other factors:
- MBDA had a right of control over Mr. Barnett’s work
- his obligations were those of an employee
- he was treated, and worked, in the same way as an employee
- the time he worked and the work he performed was agreed with MBDA
- he undertook a business trip at MBDA's request
- he wore a work badge
- the pay rates were employee pay rates
- he was subject to a disciplinary procedure which was the same as for employees
- he was integrated into MBDA’s because he worked in a team with employees.
On the basis of the guidance listed in HMRC’s own Employment Status Manual, the Special Commissioners found that
- there was no ultimate right of control on the part of MBDA, other than as required by the
- security requirements imposed by the nature of the business
- the contract documents do not require personal service and a substitute could be provided
- the provision of equipment and materials by MBDA was not significant given the security context
- there was risk of financial loss because MBDA were at liberty to end the contract
- Mr. Barnett was free to organize his work to give him more free time
- there were no employment-type benefits such as sick pay or pensions
- Mr. Barnett was not required to work exclusively for MBDA
- he was not “integrated” into the business as an employee as his projects were mainly self-contained
Accordingly, the appeal was allowed, with the effect that tax and NICs were not due on the payments under the contract as if they were employment income.
Although this case was considered in the context of the “IR35” rules, the same employment status factors should be used to decide whether an individual engaged on a “self-employed” basis should instead be treated as an employee and paid through the payroll. HMRC’s Employment Status Manual provides useful guidance.
Further information:
Datagate Services Ltd v HM Revenue & Customs http://www.bailii.org/uk/cases/UKSC/2007/SPC00656.html
Computer staff supplied by agencies http://www.hmrc.gov.uk/manuals/esmmanual/ESM4020.htm
Service companies and other intermediaries http://www.hmrc.gov.uk/manuals/esmmanual/esm3000.htm
Basic guide to employment status: relevant factors http://www.hmrc.gov.uk/manuals/esmmanual/esm0508.htm
The Finance Act 2007, after extensive consultation, provides the basis for a new structure for imposing financial penalties where a taxpayer
- files an inaccurate tax return that (1) understates the taxpayer’s liabilities, (2) overstates a loss, or (3) overstates a repayment of tax, and the inaccuracy was careless or deliberate, or
- fails, having received a tax assessment, to take reasonable steps to notify HMRC within 30 days that it is an under-assessment.
The new approach relates the determination of penalties to the underlying behaviour that gave rise to the inaccurate return or assessment. If it was caused by a mistake or misinterpretation of fact or law and reasonable care was taken, there is no penalty. Otherwise penalties at three different levels may be imposed to reflect the increasing seriousness of the behaviour, namely (1) failure to take reasonable care, (2) deliberate understatement, and (3) deliberate understatement with concealment. The penalty percentages vary according to the seriousness of the behaviour categories, with reductions for disclosure. These new provisions are expected to apply for return periods beginning on or after 1 April 2008 where the return is due to be filed on or after 1 April 2009.
As the next stage of its review of penalties, HMRC has published a consultation document that considers the way in which the new penalty regime might be extended to other taxes, including:
- pension schemes (the “accounting for tax” form)
- accounting to HMRC for repayments of student loans
- recovery of SSP, SMP, SAP and SPP from HMRC.
In the context of payroll, the extension of the new legislation to student loans and statutory payments would mean that a single penalty regime would apply to all information reported on year-end returns P14 and P35. HMRC suggests that this consistent approach would be welcomed by employers.
Comments on the proposals are invited by 6 March 2008. Instructions for sending comments are given in the consultation document.
Further information:
Modernising Powers, Deterrents and Safeguards: Penalties reform - the next stage http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=
HMCE_PROD1_028281
HMRC published a consultation document in May 2007 entitled “A new approach to compliance checks”, with a view to improving its existing statutory powers to check that taxpayers have declared the correct amount of tax. Based on the feedback from that consultation and discussions with business representatives, professional bodies and accountancy firms, a further consultation document has been issued that seeks views on new proposals for reform.
The document takes a broad look at “compliance checks” and this term is used to describe all HMRC activities in this area, from assistance and education through to full-scale civil tax investigations. Such checks include, in the context of payroll, detailed Employer Compliance Reviews.
The main proposal is that there should be a common compliance checking structure for income tax (including PAYE), NICs, VAT, capital gains tax and corporation tax, with a possible future extension to other taxes. Key features of the new approach would be
- a more flexible approach involving a wide range of checks that is more geared to different taxpayer behaviours
- lighter touch checks for the majority of taxpayers who want to comply
- sufficient powers to enable the minority who deliberately understate their tax to be properly investigated
- greater clarity and consistency across taxes of the various rules and requirements
- for all these checks, very clear definitions of the powers and the circumstances in which they can be used, and more stringent safeguards to ensure that they are used appropriately.
Comments are invited on a wide range of proposals, which cover such areas as:
- whether taxpayers should keep precisely specified records or only records that are appropriate to them
- whether there are any existing record-keeping requirements that could be removed or changed
- whether existing retention periods should be reduced
- how the inherent costs of record-keeping could be reduced
- the extent of HMRC’s powers to see non-business tax records, and to see business tax records at business premises
- how time limits for HMRC assessments and taxpayer claims might be aligned
- what deterrents would be appropriate to ensure information can be obtained from non-compliant taxpayers.
The document also includes draft guidance on record keeping and draft Codes of Practice on compliance checks, all of which are open for comments.
Comments on the proposals are invited by 6 March 2008. Instructions for sending comments are given in the consultation document.
Further information:
A New Approach to Compliance Checks: Responses to Consultation and Proposals http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=
HMCE_PROD1_028282
In the year to March 2007, HMRC collected over £423 billion and repaid £85 billion. The outstanding debt balance has average £20 billion, about 5% of receipts. In June 2007, HMRC published a consultation document entitled Payments, Repayments and Debt: The Developing Programme of Work which proposed measures that, taken together, would:
- make it easier for those who wish to pay on time to do so
- address the extra costs to taxpayers that arise from different regimes
- deal firmly with those who choose to delay payment, or not to pay at all.
The feedback from that consultation and from consultation meetings with taxpayers and representative bodies has allowed HMRC now to publish a further consultation document with further proposals and draft legislation.
HMRC is inviting comments on a range of issues, including:
- a single set of powers across all taxes for distraint (i.e. seizing goods in order to recover tax debts) and court proceedings
- splitting employer’s payments between tax and NICs when only one figure is provided
- discretionary powers for HMRC to set-off payments for one tax against debts for another
- the facility to pay tax by credit card, with appropriate safeguards
- collecting small tax debts by adjusting employees’ tax codes.
The deadline for comments is 6 March 2008. Instructions for sending comments are given in the consultation document.
Further information:
Payments, Repayments and Debt: Responses to Consultation and Proposals http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=
HMCE_PROD1_028283
Payroll deadlines during the next month
January 18 – (January 19 is a Saturday) – This is the deadline for payment of tax and NICs to the Accounts Office, for tax month 9 by employers who pay monthly, for tax months 7 to 9 by employers who pay quarterly, unless they make their payments electronically.
January 22 – For employers who pay their tax and NICs to the Accounts Office electronically, this is the deadline for electronic payments to be cleared into the HMRC bank account. Payments through BACS must be initiated by January 17 at the latest.
February 2 – This is the date by which any changes to the provision of company cars in the three months to January 5 must be reported using form P46(Car).
February 5 – This is the final day of tax month 10. Tax and NICs etc. for payments made in the tax month to February 5 are due for payment to the Accounts Office by February 19, or by February 22 if paid electronically.
Payroll FAQ's
Reporting the Provision of Living Accommodation
The benefit of living accommodation can be restricted where a part of the property has genuine business use. There are two specific situations:
- a business property that has living accommodation attached, e.g. a flat above a shop, or living accommodation with a section that is designed specifically for business purposes
- a house in which one or more rooms are used for business purposes.
In the first situation, the cost or rent of the whole of the premises should be apportioned on a reasonable basis between the part used for business and the part using as living accommodation, e.g. in proportion to the floor area. HMRC accepts that the cost or rent for the business proportion will usually be more than that for the living accommodation proportion. The gross rating value for the property, used to determine the basic charge for the accommodation, may also have to split, although the living accommodation part may already have its own gross rating value.
In the second situation, the employer should calculate the basic charge and, if relevant, the additional charge as if the property were provided entirely as living accommodation for the employee. The employee may then make a business deduction claim in respect of the proportion of the number of rooms or floor area used for business purposes.
Worked examples of these two procedures are provided by HMRC at www.hmrc.gov.uk/manuals/eimanual/eim11505.htm et seq.
Self Assessment Help Sheet IR202 allows employees to perform their own calculation of the basic and additional charges, and also provides the facility for the charges to be reduced in respect of business use in the second of the two situations explained above.
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