TAXtv: Leading IR35 expert on employment status
In this month’s TAXtv episode leading IR35 expert Matt Boddington offers advice for anyone dealing with employment status issues.
Giles Mooney caught up with the representative who was involved in two recent “employed versus self-employed” cases featured on TAXtv.
In the interview Boddington explained that the courts' fundamental approach to employment status goes back to the 1968 Ready Mixed Concrete case: “It’s really just a case that the Revenue has done a very good job of muddying the waters over the years. They do prefer this touchy feely, standing back, and painting a picture from the accumulation of detail.
“It suits the Revenue’s purpose to make status quite a difficult concept for people to understand and it scares people into putting their workers on to a PAYE.”
The courts look at the following three essential ingredients of employment. There needs to be:
- requirement of personal service
- sufficient control
- mutuality of obligation between the parties.
If any one of these three points is absent, then there won’t be a contract of employment.
Mooney notes that it’s also about the ongoing mutuality of employment – an important distinction about the nature of the relationship.
Boddington continued: “Again the Revenue has done a very good job of convincing, or trying to convince everybody, that mutuality simply means someone does some work and gets paid for it.
“In every case that comes before the court, somebody has done some work and been paid for it – and if that were true no case would ever be decided on mutuality of obligation.”
The Knight v BCCP case involving a taxi driver's appeal against an Employment Tribunal verdict that he was an employee was decided in March.
The appeal tribunal was very clear on the fact that because the taxi firm didn’t have to give the driver any particular job – even though they did and he would take the work – resulting in a lack of obligation.
While the firm was very prescriptive, because there was no obligation, the tribunal said that he cannot be an employee.
Boddington added: “There are thousands of these cases, but somehow they never seem to make it into HMRC’s manuals. The last few IR35 cases that have been prosecuted by HMRC - there just does not seem to be the appetite that there was a few years ago. It’s almost as if HMRC is weary of the legislation themselves.”
Mooney added that there was a lack of understanding of IR35 and that only the experts within the Revenue should be dealing with these cases in the future.
Boddington was reluctant to name the particular specialist IR35 team, but mentioned that the last four cases all went against HMRC - all of which have lasted many years.
In order to avoid this, the best advice is to make sure you agree self-employed terms with your client. Commit them to writing and pay attention to detail about contractual terms.
Other topics discussed in the April episode include:
- Construction Industry Scheme (CIS)
- Plumbers’ amnesty - what it means for you and your clients
- A selection of tribunal cases
- Tax deductions that are available to people working from home
- European VAT case – M. Bog
- Principle Private Residences (PPR) under the spotlight
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The April episode and related discussion points are now available to TAXtv subscribers on the TAXtv website. TAXtv's free Budget round-up is also available, in which Tim Good, Giles Mooney and Neil Warren explain the key points of this year's announcements.