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Markel Tax

21 Feb 2018

Tax advice: Help to Save scheme, status decision and inheritance tax

Every year our tax and VAT helplines receive over 55,000 calls. Each month we provide a round up of topical news, below is a short summary of the key points our team has been discussing with accountants in February.

Help to Save scheme

In a change to the scheme originally announced by David Cameron back in January 2016, Help to Save will now be available to all of those eligible to participate from October 2018 rather than this April.

In the meantime, a trial has begun with HMRC initially inviting Working Tax Credits claimants to participate, with the expectation that Universal Credit claimants will start joining from April.

Help to Save is a government backed savings account administered by HMRC in conjunction with National Savings and Investment. It enables UK residents who are entitled to Working Tax Credits or Universal Credit to save up to £50 a month and to receive a 50% non-taxable bonus on their savings.

At the end of two years, savers will get a bonus of 50% based on the highest balance achieved.

If savings continue to be made for a further two years, those saving the maximum £2,400 will receive a bonus of £1,200.

Withdrawals can be made at any time, but the bonus payment will probably be reduced as a result. 

For further information please contact our head of technical research, Guy Smith.

Status decision

HMRC’s victory over Christa Ackroyd Media Limited at the First-Tier Tribunal (FTT) has not just left Ms Ackroyd with a massive tax bill, but also raised questions about the BBC’s attitude to its on air talent and highlighted the importance of having the right contractual terms to reflect the working practices; something that applies to every PSC engagement AND to any organisation which engages subcontractors.
Ms Ackroyd, via her PSC Christa Ackroyd Media Ltd (CAM Ltd), provided ‘broadcast services’ to the BBC from 2001 to 2013, presenting Look North on BBC1. HMRC found the engagement caught by IR35 and issued determinations for income tax and notices of decision in respect of national insurance. CAM Ltd appealed these to the FTT.

The principles were not in dispute with the tribunal referring to the usual statement on the conditions required of a contract of service made in the Ready Mixed Concrete case.

Nor was it disputed that mutuality of obligations existed: there was a minimum requirement of 225 days per year and the BBC was obliged to pay the fees set out in the contract, which the tribunal accepted was the ‘irreducible minimum’ to be present if a contract of employment is to exist.

In terms of personal service, the tribunal stated that a newsreader would be expected to provide personal service whether or not they were self-employed plus the contract specifically prohibited substitution. 

The tribunal also noted that Ms Ackroyd was economically reliant on the engagement; could not profit from sound management, nor risked making a loss; and had the security of a seven year extension terminable only for breach of contract. It therefore could not accept that Ms Ackroyd was in business on her own account.

So the key issue was control. Ms Ackroyd stated that the sole reason for accepting the engagement was that she was guaranteed independence and control, confirming that she was asked for her views, and provided suggestions and ideas for the show. The tribunal did not doubt that this was the case in practice, but noted that there was no express term to that effect in the contract obliging the BBC to act on these suggestions. Indeed, the phraseology of Ms Ackroyd’s evidence pointed to the fact that, ultimately, control rested with the BBC.

When considering control, the BBC’s Editorial Guidelines featured heavily in the judgement. While the tribunal acknowledged that Ms Ackroyd was not contractually bound by these guidelines, they were deemed important in establishing the context in which the hypothetical contract must be construed. It was accepted that these guidelines did apply, and this had to be the case in order to give the contract business efficacy: it was necessary for the BBC to at least have the power to direct Ms Ackroyd’s work; otherwise Look North ran the risk of not complying with the BBC’s Editorial Guidelines.

The tribunal was also convinced that had the intention of the contract not provided the BBC with a right of control over the services, the contract would surely have contained clauses to this effect. Overall, the BBC was deemed to have ultimate control over how, where and when the work was carried out and so the tribunal found in favour of HMRC, determining that the hypothetical contract under which Ms Ackroyd would have provided services had she been engaged directly, contained terms which were more akin to a contract of employment. 

It should be noted that this judgement does not set precedent and cases – including those of other TV presenters – must continue to be judged on their own merits. 

When it comes to semantics in reviewing contracts and corresponding with HMRC, Markel Tax has been accused of pedantry on more than one occasion, although this case demonstrates that having the right contractual terms which accurately reflect intentions of the parties is key. 

It won’t just be high profile personalities who should be concerned: every contractor runs the risk of an adverse decision if the contractual terms are not properly written. Every engager of subcontractors runs the same risk. Tax status is very much in HMRC’s sights; if you believe your clients should be better protected, please contact us on 0345 0660 035.

Inheritance tax

New rules introduced from 6 April 2017 suggest an increased inheritance tax (IHT) take.

Three changes came into play:

  1. The number of years changed from 17 to 15. An individual who has been resident in the UK in at least 15 of the last 20 years will be treated as UK domiciled for IHT purposes.
  2. Change in the count. Before 6 April 2017, an individual was UK domiciled and resident in the UK for 17 of the 20 years of assessment ending with the year in which the relevant time fell. After 6 April 2017, an individual is UK domiciled and resident in the UK for 15 of the 20 years before the relevant year.
  3. New category of domicile called formerly domiciled resident (FDR). An individual is a FDR if born in the UK with a UK domicile of origin, has acquired another non-UK domicile of choice or is resident in the UK and was resident in the UK in at least one of the two previous years.

The changes effectively widen the IHT net and long term resident non-doms will be especially affected. This is a further attack on non-doms who have already seen all UK residential property brought into charge however held.
Tagged IHT trust & estate planning
Next article in series

21 Feb 2018

Another line in the sand

As previously announced at the Autumn Budget 2017, HMRC has launched a consultation with a view to extending the time limit to assess tax involving offshore income. The deadline for responses is 14 May 2018 with draft legislation expected this summer.

Strategic partners

  • Tolleys
  • Institute of Financial Accountants
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  • Lovell Consulting