Recently, a lead agency has faced a big loss with regards to an 11 million pound tax case. The dispute here was whether its mason contractors had a claim on travel expenses, free of tax.
The firm in context, here is an erstwhile lead agency. They have been supplying masons for building purposes, to construction firms. They hire them as an independent contractor as per the requirements of various ventures.
Does the firm hire these labourers in a perpetual manner, in an 'umbrella contract' hiring process, wherein it extends over all different tasks which are being done by an employee via the lead agency? Or are there also, certain gaps within those contracts, where the person may be functioning for another proprietor? Or, are there a set of different employment offer documents for every single task? These were the few questions that were raised during the first hearing of this matter at the FTT.
The crux of this matter is, whether the contractors were liable to be compensated for transport and/or relocation costs, while that amount paid was not under the bindings of taxation, neither under NIC.
If you opt for an umbrella contract hiring process, then each workspace is interim, implying that the costs can be paid without tax.
However, here are some alternative factors to be alert of:
For instance, if you provide a different hiring contract for every different task, respectively, then the working space becomes a perennial place of work. Thereby, anything paid to an 'employee' shall come within the frame and liability of taxation. It could also fall within the scope of NIC.
After the pursual of their scrutiny, HMRC stated that there had been no umbrella contract of employment. Thereby, the amounts to be paid were well within the scope of income tax. This was evident by the PAYE system and NIC.
The taxation years that were considered for this argument, was the financial tenure of 2013-14 through to the financial tenure of 2016-17. Therefore, HMRC set forth some allegations and fines, which summed up £11m as taxes which were due.
Despite the individual cost paid to every worker was a meagre amount, the lead agency had innumerable contractors employed by them, thereby accounting to the pending due of £11 million in taxes.
The lead agency then pledged an appeal against the Regulation 80 Determinations and against the NIC Notice of Decision. Thereafter, it argued its notion, stating that each workspace it offered to its contractors was not perennial in any manner.
However, the case did not work out in favour of the lead agency, as the Judge determined that the workplace was indeed perennial, as it sufficed the timeframe of each task. Therefore, the Judge declared that, both, the petitioner and the correspondent, shall have to settle the total sum of any dues to NIC and income tax.
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