Hot topics in employment tax - 2019
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
11 November 2019
Each year, the most regularly consulted-on hot topics in employment tax are subject to change – some are perennial, but others dip in and out of the spectrum. Justine Riccomini takes us through the ones ICAS members tell us are hot for 2019….
The hot topics agents are advising clients on right now (in no particular order) are:
1. The impact of the Coca-Cola case – the question over whether a van is really a van
The March 2019 appeal case of HMRC v Payne & Ors. (also known as the “Coca-Cola case”) at the Upper Tax Tribunal which upheld the First Tier Tribunal’s view that the classic definition of a van, as set out at section 115 ITEPA 2003, was not as straightforward as it seems – and that much closer consideration of the term “goods vehicle” should now be considered. Vehicles such as the VW Kombi and the Vauxhall Vivaro were called into question.
Even though prima facie, the vehicles were all marketed, sold and provided to employees as “vans”, they were deemed by HMRC to be capable of being classified as a car for benefit in kind purposes due to the (in)capacity to carry “goods”. The FTT concluded the Vivaro was a goods vehicle but the Kombis were not, and the UT upheld these decisions, dismissing both appeals. It would be prudent for advisers to review van fleets with clients and conduct risk assessments in terms of those fleets where grey areas exist.
2. Private use (or not) of vans
Always a good money-maker for HMRC, this one. The issue of whether a company policy on using vans privately is robust enough, whether any policing takes place by the employer, or even if a policy exists at all. Many vans now have satellite tracking devices on them which can either be a help or a hindrance when negotiating with HMRC, depending on what the sample data reveals!
3. Road Haulage Association (RHA) rates and proving subsistence was in fact incurred
Difficulties have been recorded in terms of lorry drivers’ subsistence and workers having to take photographs of meals taken to prove that they have actually incurred an expense.
4. Policies, risk-based systems and audits
HMRC may classify certain sectors of employers to be “risky” – and that classification can move from sector to sector, but the construction, technology, hospitality and oil and gas sectors seems to be perennial favourites. HMRC may simply request sight of a business’s policies and procedures manuals as a desk-based review before launching a full-blown employer compliance review.
5. Reg.72 income tax (PAYE) regs 2003 set-offs in contract settlements
Advisers should note that even where a set-off against liabilities under the above regulations is available as part of a contract settlement, penalties may still be calculated on the gross amount before settlement, whereas interest must be calculated on the net amount.
6. National minimum wage (NMW)
Another perennial for employers, the HMRC penalty regime and naming and shaming policy make this shark-infested waters for employers of all shapes and sizes. No employer is immune and great care needs to be taken in terms of payroll, reward and optional remuneration to ensure NMW breaches are minimised or better still, eradicated altogether.
7. Zero-hours contracts
So-called “Zero hours” contracts which used to be known as “casual” contracts are still causing some problems in terms of NMW, IR35, employment rights and in some cases, modern slavery issues. Employers should tread carefully and obtain employment law advice where they wish to implement these types of arrangements.
8. Employee ownership trusts – the right approach?
Employee ownership seems to be on the rise after many years of relative dormancy. If the owner sells majority shares in the business, there are potential CGT considerations – whereas some owners wish to gift the shares to the employees in a gesture of altruism. The full spectrum of tax aspects must be considered – not just the employee ownership share-related issues.
9. Educating clients as to who to speak to about an employment tax issue/their own understanding of the issue
One of practitioners’ ‘nightmare’ scenarios – that of the unwitting comment made by a client to HMRC which results in an employer compliance review – can easily be avoided if the client relationship is strengthened and the employer does not “say the wrong thing” about something which may not even be an issue.
10. IR35
The legislation is changing again – now for medium and large private sector businesses who engage workers through intermediaries. Read our commentary and articles and find out how best to assist clients on this increasingly complex issue.
11. Guidance obtained from HMRC webinars / talking points
If you are watching a webinar and use / receive guidance during that webinar/in response to a question you have submitted, print it off! It may help you later if you need to rely on it during an employer compliance review, especially in relation to penalties.
12. Shared maternity leave – error potential
Practitioners tell me that this is causing some issues where HMRC finds that the calculations are incorrect – and it is something which should really be checked every year on a reflective review of client payrolls. Take a look at other shared leave provisions, too.
Conclusion
Regular reviews with clients are always a good way of finding out what they may be doing which is attracting unnecessary risk – and advisers can demonstrate real added value by protecting their clients from that risk.