Status Enquiries

Status Enquiries

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We are currently representing two clients on status enquires, and have found HMRC’s conduct on both investigations exasperating.

One very serious issue is that while interviewing contractors HMRC did not make the interviewees aware that the meeting was voluntary and that they were under no obligation to give answers. Our client complained to his MP about this action and he was told that this was an oversight particular to the case in hand. However, our research turned up the following article http://www.qdosconsulting.com/qdosmain.asp?file=3bhjm92ct1sm which suggests in paragraph 6 that HMRC never advise that meetings are voluntary, and an article entitled Tactical Misinformation in the 10 April 2008 issue of Taxation which raises the issue of voluntary meetings and HMRC’s actions generally.

We have serious concerns about the way HMRC have conducted themselves on both of our enquiries. On one case the facts seem to have been distorted to arrive at the result that produces the largest tax yield. This case has dragged on for 3 years as HMRC try to defer making refunds to our clients.

On our other case HMRC initially seemed cooperative. However, they soon felt the need to interview all our client’s contractors in such a mob-handed way that many now refuse to work for our client, seriously affecting his business. HMRC have also, amazingly, failed to read our report on the status of the contractors in question, and when the opinion was issued their letter said that they were not intending to enter into a dialogue on the opinion and gave us only 10 days to respond.

The purpose of this posting is to collect others comments on the way HMRC deal with status enquiries – both good and bad. We will be taking our two cases back to the MP who one client initially complained to, and if we can gather enough evidence we will request a Judicial Review. Your comments will be gratefully appreciated and will hopefully lead to HMRC thinking seriously about how they deal with taxpayers.

Chris Thomas
Navis Agere Business Consultants LLP
Chris Thomas

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By Accounting WEB
10th Mar 2009 12:51

Interesting interpretation
We represent over 6,500 film and television workers and constantly have issues surrounding the idea of status.

Most of the problems arise from the 'rules' surrounding the industry which preclude a number of grades within the industry from being Sched D. These 'rules' originate from the Film and Television guidance notes first published in 2004. These notes list categories of engagement within the industry which can be self employed and which cannot. They also direct that any individual engaged for more than 9 months must default to PAYE irrelevant of what they do and where.

However, the first page of these notes begin by stating that they are for guidance only and do not have the weight of law.

Try telling this to the IOT's and production companies. The former who gleefully latch on to these rules when conducting a review and the later who adhere to these rules as if their lives depended upon it.

The one thing that both parties have in common is their complete lack of knowledge of case law and the 'badges' surrounding the issue of status. Many of my clients can be dropped at a moment’s notice and are wholly responsible for their own output, which they gain personally from if successful.

Is that not Mutuality of Obligations and Control?

We have considered a judicial review concerning the way some of these Inquisitions are conducted (well they don't like the word Enquiry) but the cost has always been an insurmountable barrier, I would be happy to back any profession wide, class action as I believe it is long overdue.

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By AnonymousUser
26th Aug 2008 16:47

David Kirk

My, you've come a long way since captaining the All Blacks to their only Rugby World Cup win in 1987.

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By David Kirk
26th Aug 2008 11:19

Take control ...
In my experience (I am a specialist in employment status) very few people in HMRC really know what they are talking about here. My policy is:

- We do the interviewing, not HMRC, and write to them in detail with our findings quoting extensively from the case law that has developed on the subject. If things do not look good prepare for a settlement; if they do, carry on -
- Any 'meeting' between HMRC and clients or their subcontractors takes place in front of the Commissioners;
- Go for the Specials if you can find any reason to do so - someone very senior in the Revenue will look at the paperwork before they decided to defend the case.

The result of this is that I have never actually had to take a case in front of the Specials - we have always sorted things out (generally in the client's favour) long before.

These aggressive tactics undoubteldy cost the client more at the beginning of the 'review', but overall pay handsome dividends for them. The key is to know the case law well and to be able to quote it confidently as soon as one knows the full facts.

David Kirk
David Kirk Ltd
Tel. 01246 551909
www.davidkirkltd.co.uk

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By Homeworker
20th Aug 2008 18:58

Not all bad
I recently attended a meeting with a specialist Inspector who was reviewing the status of several different categories of people working for a company specialising in training and job advice.

He was extremely helpful and wasted no time in finding two of the four groups self-employed. The third group took a little longer but they were also found to be self-employed.

The fourth group were working as tutors and quite frankly I could not find anything to support self-employed status and had warned the client of this. The status Inspector stated at the outset that his intention was not to classify people as employees if that was not the case and his approach certainly suggested that he was trying to find something to justify self-employment. It was not his fault that he could not.

The whole meeting lasted around an hour and was a very positive experience for the client and myself.

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By User deleted
20th Aug 2008 12:28

Long Delays
We have one status enquiry that has been on going since October 2006.

After some correspondence we responded to a query in November 2007 and eventually received a letter in reply with their opinion in May 2008, with no explanation for the delay. According to the complaints team this was not HMRCs fault but was due to difficulty in obtaining information from subbies. They interviewed 3 subbies, the last in November 2007. Our client has told us that HMRC have requested interviews with other subbies, some as recently as two weeks ago - 3 months after the issue of their opinion.

Once HMRC did get an interview they appear to have the tactic of asking what is on the face of it a very simple question but has a complex and significant answer, eg, "do you work regular hours". They then "cherry pick" the responses that will back up an employment status.

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By Johnandrew
18th Aug 2008 16:02

Status enquiries - approach with caution
A number of our clients have been on the receiving end of HMRC Status Reviews and as David says, the standards of the reviewing officer do vary considerably. We also adopt an approach of controlling contact with subcontractors, even to the extent of their engaging us as their temporary tax advisor so that we can represent them at any interview. A favourite HMRC tactic is to ask the subby questions that ought to be properly addressed to the contractor and which rely on the subby guessing what the "right" answer might be. You need to get hold of the Compliance Manager to make any real progress.

Note that these reviews are not only confined to the construction industry: I am currently in a debate with an employer compliance officer who claims that a freelance chef engaged at a hotel was improperly classified as being taken on in a self employed capacity. Apparently the provision of a commercial cooking range by the hotel is indicative of employee status!

If Chris would like to ring me I have other tales to tell... 01254 688100.

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By User deleted
13th Aug 2008 16:19

Status Enquiries
I have dealt with a good number of status reviews (HMRC get very annoyed if you call them enquiries!) and I only ever allow HMRC to contact the subbies as an absolute last resort, and then only in a very controlled manor (ie. being either present in the meeting or answering the questions in writing on behalf of the subbies).
They have become particularly avaricious over the past few years at trying to re-categorise workers as employees without listening to all the facts and I too have serious concerns over the way HMRC conduct themselves during these reviews.
My advice is to take an agressive stance. Keep reminding them of the four fundamental points (subject ofcourse to you being able to use these) use the Status Indicator Tool and do not look to compromise with them.
If needs be by-pass the case worker and go straight to their line manager and /or status Inspector.
The most frustating point with status reviews is the huge difference in quality of compliance officer. A small proportion are pragmatic, and understand both sides of the issues. However, a large number are not, and quickly dismiss the Status Indicator Tool, do not listen to the facts and instead jump to the wrong conclusion.
David Curtis

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By clive griffiths
12th Aug 2008 19:53

Worth Credibility Testing

This is very worrying indeed but surely it is just a taste of what lies ahead across a range of HMRC activities. Methodology and practices are as we all know, changing dramatically. The new ways inevitably almost encourage a form of aggression which, if not prepared for, will compromise clients enormously. Better knowledge of new Formal Procedural issues are now becoming a "must have" for many of us.

Perhaps better training in defence mechanisms in these hostile approaches will increase. Mind you, status enquiries have always carried an "edge". Perhaps Nichola Ross Martin may be able to secure a dynamic cutting edge status expert in these sorts of cases to produce an article. There is always large sums of tax at stake as well. The aggression itself will be initimidating to the uninitiated!! It's all ahead of us. I'll canvas my investigation consultants and see if between us we may be able to produce some written guidelines for better defence mechanisms.

That must include formidable personal defence mechanisms to be adopted from the outset, to ensure a degree of control over who does what, and when. We need a team of anti-intimidation tax consultants! The start of that must be to seize control of timing of interviews, perhaps also seeking in advance an abbreviated summary of what they want to ask etc.

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