Tax Bulletin 79

Contents

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Tax Bulletin renewal

HM Revenue & Customs are currently reviewing the publication method for Tax Bulletin. In view of this a renewal form is not enclosed with this edition. More information and a renewal form, if appropriate, will follow in the next edition of Tax Bulletin.

Employees Who Work At Home – Tax Relief For Unreimbursed Homeworking Expenses - Section 336 ITEPA 2003

This article supersedes the guidance on working from home and household expenses which appears in the Employment Income Manual at EIM32760 onwards. That guidance will be substantially re-written.

The article:

  • examines the circumstances in which employees who work from home are entitled to a deduction under Section 336 ITEPA 2003 for a proportion of their household expenses,
  • sets out the criteria which HMRC will apply in deciding if such a deduction is due, and
  • provides examples of circumstances when relief will and will not be due.

It also explains how the amount of the deduction will be calculated.

The article does not affect the tax treatment of payments which employers may make to employees who work at home under agreed homeworking arrangements (Section 316A ITEPA 2003). The guidance on such payments in Tax Bulletin 68, and at EIM01472 onwards, remains unchanged. Similarly, nothing in this article affects the deduction of expenses for trading income purposes, as set out in the Business Income Manual at BIM37600 and BIM46840.

Conditions for relief under Section 336

Section 336 provides relief for expenses that an employee is obliged to incur and pay wholly, exclusively and necessarily in the performance of the duties of the employment. The courts have consistently held that this is an objective test – see for example the speech of Lord Blanesburgh in Ricketts v Colquhoun (10TC at page 135). For an expense to be deductible under Section 336 it must be one that the employee is obliged to incur solely because he holds the employment, and not because of any reasons personal to him or herself. Thus any element of personal choice as to whether the employee works at home or at the employer’s premises will prevent a deduction under Section 336 for those employees who choose to work from home.

The Employment Income Manual, at EIM32775, reduces the underlying law to two non-statutory tests. They are:

  • that the duties that the employee performs at home are substantive duties of the employment; and
  • that there is an objective requirement that those duties should be carried out at the employee’s home and nowhere else.

Those tests are derived from judicial dicta in cases such as Pook v Owen (45TC571) and Taylor v Provan (49TC579). However those cases were about the expenses of "home to work" travel, not the additional household expenses which result from working from home. We now believe that those cases are an unreliable guide to the approach that the Commissioners and the courts might be expected to take to the question of homeworking expenses (as distinct from travelling expenses) in the 21st century.

Homeworking expenses are different from travelling expenses because the precise place where an employee lives is, usually, a matter of personal choice. It follows that the expenses of travelling to and from the employee’s home are a direct consequence of that personal choice. However if an employee has a job the duties of which do objectively require him or her to work away from the employer’s premises the resulting expenses (ignoring travelling expenses) are likely to be much the same irrespective of where the employee happens to live.

Consequently, HMRC will accept that employees who work at home are entitled to a deduction under Section 336 ITEPA 2003 for their additional household expenses where all the following circumstances apply:

  • the duties that the employee performs at home are substantive duties of the employment. "Substantive duties" are duties that an employee has to carry out and that represent all or part of the central duties of the employment (this condition is unchanged),
  • those duties cannot be performed without the use of appropriate facilities,
  • no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis),
  • at no time either before or after the contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

If one or more of those conditions are not satisfied HMRC officers will contend that the employee is not entitled to relief for the expenses of working at home. That contention is of course without prejudice to the employee’s right to appeal to the Commissioners in any case where they believe that, notwithstanding what is said in this article, they satisfy the statutory conditions in Section 336.

In practice, we think that any uncertainty is likely to centre on the last two bullet points mentioned above. Later in this article we have therefore provided a number of examples which illustrate how those conditions will apply in a range of different circumstances. In all the examples, and unless otherwise stated, it should be assumed that the conditions in the first two bullet points are satisfied.

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The expenses which qualify for relief

It is a condition for relief under Section 336 ITEPA 2003 that the expenses must be incurred "wholly and exclusively" "in the performance of" the employee’s duties. In practice that means that relief can only be allowed for:

  • the additional unit costs of gas and electricity consumed while a room is being used for work,
  • the metered cost of water used "in the performance of the duties" (if any),
  • the unit costs of business telephone calls (including "dial up" Internet access).

The following expenses are incurred mainly for the employee’s domestic purposes and therefore do not qualify for relief. In each case the expense is a single indivisible sum (or a series of indivisible sums) no part of which is incurred "wholly and exclusively" in the performance of the employee’s duties:

  • Council tax/rates (this is a change to the practice set out in EIM32815),
  • Rent (this is a change to the practice set out in EIM32815),
  • Water rates,
  • Mortgage repayments/endowment premiums,
  • Household insurance premiums.

We appreciate that it may be difficult for employees to calculate the exact amount of the allowable additional costs that they have incurred as a result of working at home. HMRC officers will therefore accept that employees who satisfy the conditions for relief (see earlier in this article) are entitled to a deduction of £2 (exclusive of the cost of business telephone calls) for each week that they are required to work at home, without having to justify that figure. Employees who wish to deduct more than £2 per week will be expected to keep records and to be able to show how their figure has been calculated. This mirrors our approach to Section 316A ITEPA 2003 under which employers can make tax- and NIC-free expenses payments to employees who work at home under "homeworking arrangements". See Tax Bulletin 68 (December 2003) and EIM01472 onwards.

An employee who has received exempt "homeworking" payments from his or her employer must deduct those payments from any amounts which they seek to deduct under Section 336. Examples 11 and 12 below illustrate the inter-action between the deduction for an employee’s unreimbursed homeworking expenses (this article) and the separate exemption for homeworking expenses reimbursed by the employer.

Operative date

HMRC will apply the guidance in this article to all open cases. Settled liabilities will not normally be reopened. However employees who have previously been denied relief under Section 336 for homeworking expenses, and who satisfy the conditions set out in this article, may obtain relief for "in-date" years by writing to their Tax Office. In the absence of evidence supporting any greater amount relief will be limited to the figure of £2 per week mentioned above.

Travelling expenses

The fact that an employee is entitled to a deduction under Section 336 ITEPA 2003 for the additional expenses of working at home does not invariably mean that he or she is entitled to a deduction for the expenses of travelling from home to another workplace. Such journeys will often qualify for relief under the "necessary attendance" rules in Sections 338 and 339 (see Tax Bulletin 68). However those journeys will not, normally, rank as travel "in the performance of the duties" of the employment for the purpose of Section 337. The courts have consistently held that the old rule of thumb that "travel between two workplaces = travel in the performance of the duties" does not necessarily apply when one of those places is the employee’s home. See the judgement of Lord Reid in Taylor v Provan (49TC at page 605E) and the later cases of Miners v Atkinson (68TC629) and Kirkwood v Evans (74TC148).

The guidance about home to work travel in the Employment Income Manual, and in paragraphs 3.29 and 3.30 of Booklet 490 (Employee Travel – A tax and NICs guide for employers) will be revised accordingly. In the meantime, that guidance should be read as modified by this article.

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Conditions for relief under Section 336 – examples

In all the following examples, and unless otherwise stated, it is assumed that:

  • the duties that the employee performs at home are substantive duties of the employment, and
  • those duties cannot be performed without the use of facilities at the employee’s home.

Example 1

A is an area sales manager who lives in Glasgow. He manages his company’s sales team in Scotland. The company’s nearest office is in Newcastle, and A therefore carries out all his administrative work at home where he has set aside a room as an office. A is entitled to relief for the additional costs which he incurs as a result of working at home. The nature of his job requires him to live in Scotland, where no employer-provided office facilities are available.

Example 2

B works for the same company as A. He is the company’s sales manager for the North East of England. The company would be happy for him to work from its offices in Newcastle, but they have agreed that B can work from his home in Durham, where he has set aside a room as an office. B is not entitled to a deduction for his homeworking expenses because he is working at home by choice.

Example 3

The company which employs A and B decides to close its regional offices and to operate solely from its head office in London. B is still the area sales manager for the North East of England and he continues to work from his home in Durham. Following the closure of the Newcastle office he has no practical alternative but to provide himself with office facilities at his own expense. B is now entitled to relief for the additional costs which he incurs as a result of working at home.

Example 4

A is promoted to become the company’s national director of sales. That is normally a head office job. However A is a fervent supporter of his local football team and rather than relocate to London he persuades the company to allow him to continue to work from home. A is no longer entitled to a deduction for his homeworking expenses because he is now working at home by choice.

Example 5

C works at his company’s offices in Leeds. His home is in Kings Lynn and he spends the week in Leeds, travelling home at weekends. His employer then introduces a homeworking policy under which those employees who wish to do so can work from home. C accepts the offer and thereafter works from his home in Kings Lynn, where he sets aside a room for use as an office. He is not entitled to a deduction for homeworking expenses because he is working at home by choice. (This example is based on a real case: Kirkwood v Evans, 74TC148.)

Example 6

D lives in Gloucester and applies for a job with a company whose offices are in Birmingham. The company are happy to pay his expenses of moving from Gloucester to somewhere on the outskirts of Birmingham. However D does not want to disrupt his childrens’ schooling, or to commute between Gloucester and Birmingham, so he asks the company if he can work from home. The company agrees, and D’s employment contract says that he will be home based. He sets aside a room for use as an office. D is not entitled to a deduction for homeworking expenses because he is working at home by choice. The contractual term requiring him to work at home is simply an expression of his personal choice.

Example 7

A company employs a team of sales people whose job is to follow up sales leads by telephone. The company trades from two small offices which house the director, her secretary and two clerical staff. There is no room for the sales team, who are recruited specifically on the basis that they will work from home. The members of the sales team are entitled to a deduction for the additional costs which they incur by working at home.

Example 8

The company in example 7 becomes so profitable that it is able to move to larger premises. New recruits to the sales team are required to work at the company’s premises. Existing team members who live within daily commuting distance are invited to do so. Those who decide to continue to work from home are now doing so by choice, and are no longer entitled to a deduction for a proportion of their household costs.

Example 9

E is the UK sales representative of a Dutch company. The company does not have an office in the UK so E is recruited on the basis that he will work from home. He is entitled to a deduction for the additional costs that he incurs as a result of working at home.

Example 10

F is a teacher at a secondary school. During term time she regularly takes work such as marking exercises home to complete in the evenings and at weekends. However she has free periods during the school day and the school has rooms available where she can mark papers if she wishes to do so. F is not entitled to a deduction for the expenses of working at home because appropriate facilities are available on her employer’s premises. She may feel that those facilities are inadequate, but that is not enough to satisfy the statutory test. It is not an objective requirement of her job that she should perform any of her duties at home.

Example 11

An employer introduces a homeworking policy under which employees who wish to work from home may do so. The employer makes a payment of £2 per week towards the additional household expenses of those employees who decide to work from home. The £2 per week is exempt from tax under Section 316A ITEPA 2003 (see EIM01472 onwards). However employees who can show that working from home costs them more than £2 per week are not able to obtain a deduction for the excess under Section 336 because they are working at home by choice. The conditions for relief under Section 336 are more restrictive than the conditions for exempt payments under Section 316A.

Example 12

G is the North of England representative of a company whose only offices are in London. HMRC have agreed that he is entitled to a deduction under Section 336 ITEPA 2003 for the expenses of working at home, and he produces evidence that his additional household expenses, allowable under Section 336, amount to £3 per week. However, his employer makes a contribution of £2 per week towards those expenses. That contribution is exempt from tax under Section 316A. The amount G is able to deduct under Section 336 is therefore £1 per week, being the difference between his allowable, additional expenditure of £3 per week and his employer’s reimbursement of £2 per week.

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Employees Sent From Abroad to work in the United Kingdom - Time Apportionment of Earnings for Class 1 National Insurance

Introduction

Tax Bulletin 59, 63 and Statement of Practice 5/84 explained how to compute "non-UK workdays" for tax. Legislative differences between tax and NIC treatment of duties overseas mean that the SP 5/84 practice for computing
"non UK workdays" for tax has no direct relevance for Class 1 NIC.

There are certain fairly unusual circumstances where earnings are to be apportioned on a daily basis between UK and non-UK employment for NIC. This article looks at where this can arise and sets out our practice for computing the resulting apportionment.

This article looks at a scenario where apportionment is appropriate but some employers will have operated NIC on the whole salary and refunds may be due. Details of how these might be claimed are at the end of the article.
This scenario arises where the employee is not covered by the EC Treaty and EC Regulations 1408/71, by bi-lateral Social Security agreements, Regulation 145 (1) or Regulation 146 Social Security (Contributions) Regulations 2001 and where the employee is:

  • not ordinarily resident in the UK,
  • works in the UK under contract to their foreign employer, and
  • returns overseas to perform duties overseas for the purposes of that foreign employer, and
  • paid a salary in respect of their UK employment and their employment with the sending employer, and
  • it can be shown that the employment costs were met by the overseas employer and therefore for the purposes of that foreign business.

Where these criteria are met, salary in respect of the days working overseas for the foreign employer can be excluded from the computation of earnings for NIC purposes.

The practice for computing Class 1A NIC on certain taxable benefits does closely follow the apportionment method used for tax following SP 5/84 and is dealt with in a separate article in this Tax Bulletin.

Details

Tax Position

An employee resident but not ordinarily resident in the UK is liable to UK tax under Section 25 ITEPA in respect of duties performed in the UK. Such employees are also liable under Section 26 on emoluments for duties performed outside the UK but only to the extent that the emoluments are received in the UK. Where the duties of a single office or employment are performed both in and outside the UK, an apportionment is required to determine how much is attributable to UK duties and how much attributable to foreign duties.

NIC Position

In Social Security law, it may harm the future benefit entitlement of the employee if they fragment their contribution record by paying to the schemes of several countries, so the rules are designed to minimise gaps on their UK contribution record.

When a person leaves the UK to work overseas, there is no liability for Class 1 NICs on the earnings paid in respect of that employment unless:

  • EC Regulations or a Bi-lateral agreement applies to keep the person in the UK scheme, or
  • Regulation 146 Social Security (Contributions) Regulations 2001 (SSCR 2001) applies to keep the person in the UK scheme, or
  • The special rules for certain groups such as mariners, aircrew and continental shelf workers apply, or
  • the trip overseas is merely a temporary absence from the UK based employment.

For NIC purposes the world can be usefully divided into:

European Economic Area (EEA)

EC Treaty and EC Regulation 1408/71 applies to employees moving between EEA Member States to work. It modifies SSCBA 1992 and regulations.

RA /DCC Countries

Bi-lateral Social Security agreements modify SSCBA 1992 and regulations.

Rest of The World

SSCBA 1992 and contributions regulations are unmodified.
A list of which countries are EEA, RA or DCC countries is at the end of the article.

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Where EC Regulations, RAs or DCCs apply

The UK has entered into a series of agreements with other countries to protect the interest of the employee by ensuring that when they work overseas, they do not fragment their Social Security record or pay contributions twice on the same earnings. EC Regulations and most RAs and DCCs contain special rules for those who move between countries to work and normally work in more than one country. The agreements determine which State’s legislation will apply, and therefore to which country contributions should be paid.

If under the terms of the EC Regulations, a RA or DCC, a person remains in the UK’s Social Security scheme when working abroad they will pay NIC on all their earnings from the employment – without the need to apportion.

You can find out more about the EC Regulations, RAs and DCCs by visiting the pages of the Centre for Non-residents.

"Rest of The World" – Work in countries where EC Regulations, RAs or DCCs do not apply

There is no liability to pay UK Class 1 NIC unless there is employed earners employment (or employment treated as employed earners employment) here in the UK.

Regulation 146 SSCR 2001

This Regulation treats as employed earners employment, employment outside the UK for the first 52 weeks of that employment. However, Regulation 146 only applies where an employee is:

  • ordinarily resident for NICs purposes,
  • resident here before taking up the foreign employment, and
  • their employer has a place of business in the UK.

This regulation will not apply where the employee or employer fail to meet the criteria as to residence or place of business.

However, this is not the full story because where the employment is one based here, short trips overseas can count as being part of the UK employment.

An employed earner is defined in Section 2(1)(a) as a

"person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with general earnings chargeable to income tax under ITEPA 2003".

This requires that employment duties take place here. However, this is wide enough to allow for some temporary or incidental duties of the employment to be performed outside the UK, if the UK is the place where the employment duties are usually performed.

To be liable for NICs, a person must also meet the conditions of residence or presence in the Contributions Regulation 145(1) 2001 (SSCR 2001).

Regulation 145(1) SSCR 2001

Under this regulation a person is liable to Class 1 contributions if "that employed earner is resident or present in Great Britain or Northern Ireland (or but for any temporary absence would be present in Great Britain or Northern Ireland) at the time of that employment or is then ordinarily resident in Great Britain or Northern Ireland."

The effect of Regulation 145 (1) SSCR 2001 is to provide for a kind of constructive presence for periods outside the UK which are merely a "temporary absence". This concept of temporary absence requires that:

  1. the person’s absence be temporary,
  2. that if he were not absent he would be present in the UK.

This means that an employee who has employment based in the UK who goes abroad for a time on a short business trip or holiday abroad, and who departs from or returns to the UK, can continue to be within the UK scheme.
An example of this would be the person who flies to a board meeting outside the UK and then returns to their UK based employment.

Taken together, Section 2(1)(a) SSCBA 192 and Regulation 145 (1)(a) SSCR 2001 is enough to keep a person within Class 1 NIC if their employment is based here and their absence abroad is of a temporary or incidental nature. However, crucially, an employee who is not ordinarily resident in the UK and who normally works overseas cannot be said to be merely "temporarily absent" from employed earners employment in the UK if they are departing overseas for a time, to work for their foreign employer. In such a situation, the person is not performing duties which is merely incidental to the employed earner’s employment in the UK but is returning to an employment based outside the UK. In the absence of an express contractual provision as to the attribution of the earnings, the earnings must be apportioned between the employed earner employment in the UK and the overseas duties for the foreign employer.

Other relevant legislation

Regulation 145(2) SSCR 2001

Employees who are not ordinarily resident in the UK and who are sent from a "Rest of the World" country to work in the UK may be able to claim a 52 week exemption if they are:

  • not ordinarily resident in the UK, and
  • not ordinarily employed in the UK, and
  • in pursuance of an employment that is mainly outside the UK,
  • by an employer with a place of business outside the UK, and
  • is employed for a time in the UK as an employed earner.

The exemption lasts until the employee has been resident in the UK for a continuous period of 52 weeks starting from the beginning of the contribution week following the week in which the worker arrives in the UK to take up employment.

Employer contributions

The secondary or "employer" Class 1 contribution liability arises where there is a primary Class 1 NICs liability, and on the same amount of earnings.

However, the secondary contributor must meet the conditions of residence, presence or place of business in Regulation 145(1)(b) SSCR 2001.

Where there would otherwise be no secondary contributor in the UK, the "host employer" provisions of Paragraph 9 Schedule 3 Social Security (Categorisation of Earners)Regulations apply. Under these provisions, the UK "host" employer is the secondary contributor. The provisions apply where the personal service of the employee is made available to the UK "host" employer and the personal services are rendered for the purposes of the business of the host.

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Example 1

Resident / Not Ordinarily Resident UK - Sent from ROW country to work in the UK - contractual employer in ROW country but seconded to the UK "host" employer.

An Australian employer assigns Angus, who normally works in Australia to the United Kingdom for 2 years. Residence status is resident in the UK but not ordinarily resident in years 1 and 2.

Angus meets the criteria for a 52 weeks exemption from NIC because he is not ordinarily resident in the UK and he is not ordinarily employed in the UK and is working for his overseas employer and is in the UK in continuance of that employment. His Australian employer has no place of business in the UK.
Once the first 52 weeks period in Regulation 145(2) SSCR 2001 has expired, Angus will become liable for contributions in the UK. As his contractual employer has no place of business in the UK, the UK "host" employer to whom personal service is made available is the secondary contributor - liable for the employer part of the National Insurance. [Paragraph 9 to Regulation 3, Social Security Categorisation of Earners Regulations 1978].

When he is in the UK, Angus is in employed earner’s employment and meets the residence criteria in Regulation 145 (1) SSCR 2001 because he is present in the UK at the time of his employment.

Angus makes a short trip back to Australia in year 2 to brief the Australian company.

After 14 months in the UK, Angus returns to Australia for the month of June - 20 days holiday and 5 days working for the Australian company. He then returns to the UK to complete the rest of his assignment. Angus remains under contract to the Australian company and the costs of his employment in the UK is met by the Australian employer. There is no apportionment of salary specified in the contract. There can be apportionment of his salary for the days working outside the UK.

When Angus is in earners employment in the UK he is liable for NICs on his salary because he meets the criteria of residence and presence in Regulation 145 (1) SSCR 2001.

When in Australia, Angus is not in employed earners employment in the UK - his employment is one which is normally based outside the UK - so that the days working in Australia are not an incidental part of employed earners employment in the UK.

What if the employment had been funded by the UK company?

We would consider this a strong indicator that Angus was performing his duties in Australia for the purposes of the business of the UK "host" employer and his time in Australia was merely a "temporary absence" from employed earner’s employment for the purposes of Regulation 145(1) SSCR 2001.
What if there is a letter of secondment - attaching Angus to his UK employer
We consider that this would be a strong indicator that Angus’s normal base is the UK and he can be considered to be merely "temporarily absent" for the purposes of Regulation 145(1) SSCR 2001 - the duties in Australia are incidental to the employment in the UK for which he is paid his salary.

What if Angus had travelled to China for 3 days to act on behalf of the UK company?

Angus’s normal base is the UK and he can be considered to be merely "temporarily absent" for the purposes of Regulation 145(1) SSCR 2001 - the duties in China are incidental to the employment in the UK. No apportionment is required.

What if Angus had travelled to China for 3 days to act on behalf of the Australian company?

The duties are not further to the employment in the UK and cannot be regarded as merely a temporary absence. An apportionment is required.
What if Angus has been sent to the UK and become ordinarily resident here?
If Angus’s normal base is the UK he will be in employed earner’s employment in Great Britain. As he is ordinarily resident he meets the residence criteria in Regulation 145(1) SSCR 2001 - the duties in Australia are merely incidental to the employment in the employed earner’s employment in the UK for which he is paid his salary. No apportionment is required.

Exactly how many days amounts to a "temporary absence"?

Whether an absence is a temporary absence is a question of fact and degree, which depends upon the nature of the circumstances. Examples of what we would consider to be temporary absence would include short business trips or holidays.

Method of Time Apportionment

In the absence of contractual provision, there is to be an apportionment between UK and non-UK workdays under Section 2 of the Apportionment Act 1870. Under the Apportionment Act, salary accrues on a daily basis. The earnings are to be multiplied by a fraction where the numerator is the number of days working overseas in the overseas employer’s business and the denominator is the total number of days in employment – in a full year this will be 365 days.

Where the employee is monthly or weekly paid, the computation has to take account of the "pay period" basis for computing NIC.

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Example 2

Mrs Patel is ordinarily resident in India and is sent to the UK by her employer to work in the UK at the offices of a UK company which is part of the group. She remains under contract to the Indian employer and the Indian employer bears the cost of the employment. Her salary is £100,000. Her employer recalls her to India to advise on a hostile take-over for a period of 5 days - From 1 June until 5 June. The substantial part of 2 of those days is spent flying to India and back.

The earnings are multiplied by a fraction where the numerator is the number of days working overseas in the overseas employer’s business and the denominator is the total number of days in employment .

If Mrs Patel has an annual pay period, then the appropriate fraction can simply be applied to her annual salary.

Gross Pay £100, 000X
5/ 365

Amount attributable to overseas workdays less £1369.87

NIC is operated on the gross pay
attributable to the UK £98,630.13

However, if Mrs Patel is monthly paid, the employer has to account for NIC each month as a payment is made, and is unable to "look back" over a year and know what percentage needs to be applied. So the apportionment has to be done in the monthly pay period.

In June, no NICs are due on the salary paid in respect of the work in India.
The earnings on which NICs are to be calculated are those for the month of June – after an apportionment to take account of the 5 days which were not in respect of the employed earners employment.

Monthly salary £8333.33
X 5/365 x 100,000
less £1369.87

Amount attributable to non-UK workdays £1369.87

NIC is operated on the monthly gross pay attributable to the UK £6963.46

Holidays

If Mrs Patel were to take a holiday in India, the holiday may need to be brought into the calculation of non-UK workdays in the apportionment – depending on the contractual provisions and whether the holiday is attributable to the UK or overseas employment.

In Example 2, if in June Mrs Patel took 10 days holiday in India – in the absence of contractual provisions setting out how holiday accrues, these would be added to the 5 days working in India:

Salary £8333.33
15/365 x £100,000

amount attributable to non-UK workdays = £4109.59

Earnings in the Month on which NIC must be operated = £4223.74

What about part of a day worked in the UK and part overseas?

We operate the practice in SP 5/84 with regard to days spent working partly in the UK and partly outside the UK. That is to say, if a day is substantially worked overseas for the overseas business then it will count as a non-UK work day in the apportionment computation. Where an employee spends a whole day working in the UK but then leaves the country that evening on an overseas business trip, it would be difficult to say as a matter of contract that the employee’s emoluments for that day were not attributable on a time apportionment basis to duties performed in the UK. It follows that the emoluments for a day spent working overseas before returning to the UK in the evening will be attributable to duties performed overseas.

Records

Employees are required to retain evidence such as travel documents and business diaries to demonstrate how they have calculated non-UK workdays for tax. Where records of "non-UK workdays" for tax have been kept, these may be used as the basis for identifying non-UK days for National Insurance.

Repayment Claims

Some employees and employers could be entitled to repayments. This will be in circumstances where the employee is not ordinarily resident in the UK, was seconded to the UK by an employer in a "Rest of the World" country, worked for the foreign employer in the UK, returned to work for part of the time in the sending employer’s business but was paid a single salary for both UK and foreign duties. Records used to record non-UK work days for this group, for tax purposes, would be an acceptable basis for identifying their non-UK workdays for NICs.

Claims for repayment should be accompanied with a schedule (like the one attached) showing how the repayment claim has been computed, be accompanied by copy of form P35, and a signed statement from the secondary contributor in the UK that the employment costs have not been funded by the UK company.

"I refer to the employees listed on the attached Appendix. I can confirm that work undertaken outside the UK by the individuals, during the relevant period, was by reason of their continuing employment with their offshore employer (where different offshore employers are involved these have been notified accordingly). I can confirm that the total earnings relating to the overseas workday element of the continuing overseas employment were:

  • paid and effectively borne by the overseas employer,
  • not paid by any UK employer or by any UK resident person,
    and that no costs relating to the overseas workday element of the continuing overseas employment have been or will be borne or incurred, directly or indirectly, by any person who is resident in the UK".

Claims are made in the terms set out above, they can be sent directly to:

NICO
Refunds Multi Erroneous
Room BP1001
Benton Park View
Longbenton
Newcastle Upon Tyne
NE98 1ZZ

Schedule

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European Economic Area Countries

List of Agreement Countries

Austria
Belgium
Cyprus (Republic of Cyprus not Northern Cyprus)
Czech Republic
Denmark
Estonia
Finland
France
Germany
Gibraltar
Greece
Hungary
Iceland
Republic of Ireland
Italy
Latvia
Liechtenstein
Lithuania
Luxembourg
Malta
Netherlands
Norway
Poland
Portugal
Spain
Slovakia
Slovenia
Sweden
Switzerland

Reciprocal Agreement Countries

Barbados
Bermuda
Bosnia-Herzegovina
Canada
Croatia
Guernsey
Israel
Jamaica
Japan
Jersey
Macedonia
Mauritius
Montenegro
New Zealand (Social Security Benefits only)
Philippines
Republic of Korea
Serbia
Turkey
USA

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Employees Sent From Abroad to work in the United Kingdom - Time Apportionment of Earnings for National Insurance – Application of Statement of Practice 5/84 to Class 1A

The article above looked at how SP 5/84 does not apply to Class 1 NIC and that different tax and Class 1 NIC rules meant that there are only limited circumstances where earnings are apportioned between UK and non-UK workdays.

Class 1A is the employer only NIC charge on certain taxable benefits provided to an employee by reason of employment.

With Class 1A – where an employee is resident and not ordinarily resident in the UK, and has earnings from employment inside and outside the UK, there is greater scope to align tax and NIC practice. HMRC’s practice for Class 1A is to follow the charge to tax – using the same method of apportionment and remittance. Here the practice is broadly in alignment with SP5/84. As SP5/84 acknowledges, there may be circumstances where this method will not be appropriate but we expect this to be rare.

Other Information available

Detailed guidance about Class 1A can be found in the CWG 5 Class 1A National Insurance contributions on benefits in kind - A guide for employers and in CA 33 Employer’s manual on Class 1A NICs on Cars and Fuel.

Background

Liability for Class 1A NICs can only arise where:

  • the benefit provided is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by an employee from any employment,
  • a liability for UK NICs arises for any part of the tax year in which the benefit is provided.

Providing these primary conditions are satisfied, Class 1A NICs are:

  • a secondary contributor’s liability only (normally an employer’s) except in limited circumstances where a benefit is provided by a third party,
  • payable on most benefits in kind,
  • payable broadly where the employees earn £8,500 or more or are directors (but there is an exception for an exception to this general rule where non cash vouchers are provided by third parties),
  • charged at the not contracted-out, secondary (employer) Class 1 NICs percentage rate in force during the tax year in which the benefit is provided. Assessed by reference to the cash equivalent of a benefit calculated for tax purposes and reported by employers on form P11D, Return of Expenses and Benefits,
  • payable annually by the 19 July following the tax year in which the benefit is provided,
  • reported annually using form P11D(b), Return of Class 1A National Insurance contributions.

Apportionment

Where an employee is resident but not ordinarily resident in the UK, and has both UK workdays and overseas work days, with no contractual provision as to the apportionment, an apportionment is required for tax purposes between income chargeable under Section 25 and income chargeable under Section 26.

Stage 1 – Section 25 Income

For Class 1A the practice is to calculate Class 1A on the proportion of the total benefits that count as general earnings chargeable to tax under Section 25 ITEPA 2003.

Example:

Darla is resident in the UK but not ordinarily resident and works 50% of the time for a company in the UK and 50% working for them overseas in Hong Kong.

In 2005/06 tax year she receives general earnings £200,000 comprising £100,000 and £100,000 benefits, with 50% UK workdays and 50% overseas workdays computed under SP 5/84. The tax charge would be on £100,000 consisting of £50,000 salary (50%) and £50,000 benefits (50%). Class 1A NICs would be due on £50,000 benefits.

Stage 2 – Section 26 Income

In addition to this, there could be a Class 1A charge on the balance following the practice in SP 5/84. Thus the Class 1A charge would arise on the taxable benefits to the extent that total UK remitted emoluments exceed £100,000.

Assuming that -

£80,000 out of £100,000 of the benefits were remitted, together with £40,000 of salary – a total of £120,000.
£100,000 is to be dealt with under Section 25 ITEPA 2003; the balance of £20,000 is taxable on remittance to the UK. Since the proportion of total UK remittances is two-thirds benefits and one third salary, two thirds of the £20,000 chargeable ie £13,333 is benefits for Class 1A purposes.

Double Taxation Agreements (DTAs)

Where a DTA provides to exempt an employee from UK tax liability, Class 1A will be operated only on the sum which is taxable in the UK. However, where under the DTA the taxable benefit is taxable in the UK but relief is claimed as a credit against that benefit, there will remain a Class 1A liability.

Recording the apportionment

The back of the P11D(b) form, on which Class 1A is recorded, allows for an employer to record adjustments to the computation of Class 1A. The employer should treat the benefit as being unavailable on those days which count as non-UK workdays.

For further information about this article please contact

Mark Frampton - Overseas Issues
Steve Watts - Class 1A Issues
BP 7201
Benton Park View
Longbenton
Newcastle Upon Tyne
NE 98 1ZZ

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Interpretation

Change of Interpretation:

Investment trust companies:

Eligible investment income and offshore income gains

Accounting periods starting on or after 1 January 2006

All statutory references are to the Income and Corporation Taxes Act 1988 unless otherwise stated.

We have been considering whether an offshore income gain computed under section 761 falls within the definition of eligible investment income for the purposes of section 842.

Investment trust companies may have disposed of material interests in offshore funds that do not qualify for "distributing fund" status.

Our previous view was that an offshore income gain arising from such a disposal would qualify as eligible investment income for the purposes of section 842.

We now take the view that an offshore income gain would not qualify as eligible investment income for the purposes of section 842. This applies for accounting periods commencing on or after 1 January 2006.

Eligible investment income

Section 842 provides the detailed conditions that a company must meet in order to obtain approval from the Board as an "investment trust".

The gains of an approved investment trust are not chargeable gains by virtue of section 100(1) Taxation of Chargeable Gains Act 1992 (TCGA 1992).

Section 842(1)(a) provides that to obtain investment trust status for any accounting period, a company must, inter alia, meet the condition that its income consists wholly or mainly of eligible investment income.

Section 842 (1AA) provides that income is eligible investment income for the purposes of section 842 in so far as it is either:

  1. income deriving from shares or securities, or
  2. eligible rental income, within the meaning of section 508A.

Offshore income gain

Sections 756A – 764 in Chapter V Part XVII contain anti-avoidance legislation for offshore funds. In some circumstances, it provides for the gain on disposal of an interest in an offshore fund to be treated as income, referred to as an "offshore income gain".

An offshore fund is defined in section 756A as a collective investment scheme constituted by:

  • A company that is resident outside the UK, or
  • A unit trust scheme, the trustees of which are not resident in the UK, or
  • Arrangements not falling within the above, taking effect by virtue of the law of a territory outside the UK and which under that law create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the UK).

For taxation purposes there are two types of offshore fund:

  • Those with distributing fund status.
  • Those without distributing fund status.

In order to obtain distributing fund status an offshore fund must satisfy a number of tests concerning its distributions policy and its investments. These tests are stipulated in section 760 (2) and (3) as supplemented by Parts I and II of Schedule 27.

If an offshore fund meets the tests for distributor status and is certified as a distributing fund by the Board then the anti-avoidance rules will not apply. The normal chargeable gains rules apply to the computation of the gain upon disposal of material interests in that offshore fund by investors subject to UK capital gains tax or corporation tax on chargeable gains.

The disposal of material interests by investors subject to UK capital gains tax or corporation tax on chargeable gains is different where the Board has not certified the offshore fund as a distributing fund. Such disposals give rise to an "offshore income gain" and are governed by the rules in Schedule 28.
Schedule 28 provides that upon disposal there shall first be determined the amount of any unindexed gain accruing to the person making the disposal.
Subject to section 757(3) to (6) and paragraph 3 of Schedule 28, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of TCGA 1992 if it were computed:

  1. without regard to any charge to income tax or corporation tax by virtue of section 761, and
  2. without regard to any indexation allowance on the disposal under TCGA 1992.

Section 761(1) provides that an offshore income gain shall be treated for all the purposes of the Tax Acts as income arising at the time of the disposal to the person making the disposal and, with regard to companies, constituting profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the disposal is made (section 687(1) ITTOIA 2005 is the charging provision with regard to individuals).

Discussion

It is now our considered opinion that, notwithstanding the tax treatment accorded by section 761, the disposal of a material interest is, in essence, a disposal of a capital asset. Whilst section 761 deems the gain arising on disposal to be income for the purposes of the Tax Acts it does not re-characterise the source of the deemed income. The deemed income cannot be said to be derived from the share or security in the generally understood sense of "flowing from" the holding of the share or security. It is therefore not eligible investment income for the purpose of section 842 as it arises from disposal of an asset.

Section 757(2) provides that there is a disposal of an asset for the purposes of the offshore fund regime if there would be such a disposal for the purposes of TCGA 1992. Paragraph 2 Schedule 28 covers the computation of the offshore income gain. This continues the TCGA 1992 theme. Paragraph 2(1) provides that there shall first be computed an unindexed gain, which is the amount which would be the gain on that disposal for the purposes of TCGA 1992 if it were computed without regard to any charge to income tax or corporation tax by virtue of section 761 and without regard to any indexation allowance on the disposal under TCGA 1992.

With regard to offshore funds, where the income is rolled up there is no distribution of income that can be taxed in the hands of the UK investor under the income tax rules. The investor only realises any profit or gain upon disposal of the material interest in that offshore fund. This is clearly a capital gain to which the chargeable gains rules in TCGA 1992 would apply but for the offshore funds legislation in sections 756A – 764.

We are aware that a number of investment trust companies may have structured their investments on the basis of the previous view. To enable these companies to adjust their investment portfolios, the current view, as set out above, will not apply immediately. It will apply to all accounting periods beginning on or after 1 January 2006.

Please address any enquiries to:

David Moran
CT & VAT Products & Processes
Financial and Insurance Team
Third Floor
100 Parliament Street
London
SW1A 2BQ

Tel: 020 7147 2612

David Moran

Lee Harley
CT & VAT Products & Processes
Financial and Insurance Team
Third Floor
100 Parliament Street
London
SW1A 2BQ

Tel: 020 7147 2597

Lee Harley

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Miscellaneous

Creation Of A Legal Gateway Between HMRC And The Financial Reporting Review Panel

Background

In 2002 there were a number of widely publicised corporate collapses in the US which, at least in part, were attributed to accounting failures. The UK Government responded by setting up the Co-ordinating Group on Audit and Accounting (CGAA) to review the adequacy of the UK regulatory regime for statutory audits and financial reporting.

The CGAA was to seek ways of strengthening the roles of key players within the regulatory framework and, where practicable, to consider increasing the effectiveness of the UK system. One of its recommendations was the adoption of a risk based pro-active approach by the Financial Reporting Review Panel (the Panel). The Panel is one of the operating bodies of the Financial Reporting Council, the regulator for the accountancy profession. The Panel’s role is to ensure that the provision of financial information by public and large private companies complies with relevant accounting requirements.

It was initially established as a reactive body to respond to matters drawn to its attention by third parties or press comment. In light of the US corporate collapses the CGAA felt it was important the Panel introduced an element of pro-activity into its approach. As a result, the Panel now adopts a risk-based approach to the selection of accounts for review and, where appropriate, further investigation.

In order to assist the Panel in this revised approach, the CGAA also recommended the introduction of a legal gateway to enable HM Revenue & Customs (HMRC) to play a role in the enforcement process by being able to provide information to the Panel where there may be a breach of the relevant accounting requirements. The Government accepted this recommendation and the Companies (Audit, Investigations and Community Enterprise) Act 2004, which came into force in January 2005, formally put the legal gateway in place.

The purpose of the legal gateway

There have been occasions in the course of HMRC normal tax review work where HMRC has uncovered information about a company’s accounts, which is potentially of interest to the Panel. When initial discussions took place on how HMRC could assist the Panel, HMRC highlighted a range of anonymous examples that indicated areas of potential non-compliance with accounting requirements and that were not highlighted in audit reports. The Panel confirmed that they would have been interested in all of those particular examples. HMRC operate under strict rules of confidentiality and had been unable to report to the Panel in the absence of an express legal gateway. Additionally, many of the issues arose in the accounts of subsidiaries of large groups, which are not always subject to the same degree of external scrutiny. As a result the Panel, under their previous reactive approach, were unlikely to have been alerted by third parties to the issues HMRC identified and would not have been able to address them. The introduction of the legal gateway will resolve both of these issues, in that it allows HMRC to pass information to the Panel on issues arising in accounts to which the Panel may not otherwise have been alerted.

The operation of the legal gateway

Passing information to the Panel could, in accordance with the Panel’s Operating Procedures, lead to a formal investigation into a company’s accounts. This is an important matter and will not be done lightly. HMRC have given assurances to companies that it will only report the most serious cases, which are currently expected to be few in number each year.

A publicly available Memorandum of Understanding (MOU) has been prepared which sets out the procedures HMRC will follow. The key points of the MOU are as follows:

  • The gateway applies in respect of accounting periods ending after 6 April 2005.
  • The gateway is a one-way operation. FRRP cannot ask HMRC to make enquiries on its behalf or to supply it with any information about a company. The passing of information can only be initiated by HMRC.
  • The Panel’s authority extends to all companies that prepare accounts under the Companies Act. In practice the Panel normally exercises this authority only in connection with the accounts of public and large private companies, although the Panel may exercise its authority in connection with the accounts of other companies where considered appropriate.
  • HMRC is entitled, but not obliged, to provide information to the Panel. It is a matter for the Panel to decide what action, if any, it takes as a result of a disclosure by HMRC.
  • HMRC will not make enquiries on behalf of the Panel, rather it will only make enquiries in the course of undertaking its normal functions. However, if HMRC comes across apparent irregularities it will, as now, use its qualified accountants to make the necessary enquiries to satisfy itself that the accounts comply with Generally Accepted Accounting Practice as is required for the Taxes Act. If, after making these enquiries, HMRC is satisfied that the accounts do comply then there will be nothing to report. If, however, HMRC is still not satisfied, the matter will, in the first instance, be reported by its qualified accountants to HMRC’s Commissioners Advisory Accountant (CAA).
  • The Commissioners of HMRC have delegated the disclosure powers to the CAA, who will make all disclosures to the Panel.
  • The CAA will review the matter and offer the company the opportunity to make further explanations before deciding whether the case is sufficiently serious to submit to the Panel. Based on current experience, HMRC do not expect to submit many cases each year.
  • If the CAA decides to make a disclosure then a copy of the disclosure will be given to the company. The disclosure will always be in writing.
  • The CAA and the Panel will meet periodically to consider the workings of the MOU. One of the matters that will be discussed is whether HMRC is reporting the correct issues and cases.
  • The Panel, having received a disclosure, will review the relevant accounts and decide, in accordance with their Operating Procedures whether the matter should be pursued. If they decide not to pursue the matter they will tell HMRC why. If the matter is pursued the Panel will give a report on the outcome of their enquiries. This mechanism, along with the periodical meetings, should enable HMRC to be better informed as to what matters are of concern to the Panel.

As the tax liability of a company is based on its individual accounts rather than group accounts, HMRC will usually make disclosures in relation to the individual accounts. It is possible that the apparent non-compliance in the individual accounts also finds its way into the consolidated accounts, in which case HMRC will report both sets of accounts. The Panel has confirmed that they have a legitimate interest in individual company accounts which must comply with the law. Thus the fact that an instance of non-compliance in an individual company’s accounts may not be material at group level, or that an error in the individual accounts has been corrected in the consolidated accounts will not be a reason for HMRC failing to report the case to the Panel. As one might expect, HMRC will report serious potential irregularities, irrespective of any action that the company undertakes to take to correct the accounts.

Finally, it is worth repeating that for the purposes of the Companies Act, it is the Panel that makes the final judgement as to the compliance of the accounts with relevant accounting requirements (subject to any court procedures) not HMRC. The role of HMRC is, where it thinks the matter is sufficiently serious, to disclose suspected accounting irregularities to the Panel for them to investigate.

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New Civil Investigation of Fraud Procedures

Both HM Customs and Excise and the Inland Revenue had procedures for tackling suspected serious tax fraud using civil powers. The former Inland Revenue’s Hansard procedures and all the former Customs & Excise Civil Evasion procedures are being replaced with a new single Civil Investigations of Fraud procedure for HMRC. (The only exception is the Customs Duties Civil Evasion Penalties applied to traveller at ports and airport controls).

1 September 2005 start and new Code of Practice 9(2005)

The new Civil Investigation of Fraud procedure came into effect on 1 September 2005 for new cases with a new Code of Practice 9(2005).

Existing cases will be worked to a conclusion under the old Hansard procedures (Code of Practice 9), New Approach or Notice 730

Initially the new procedure will only be used by officers serving in HMRC Special Civil Investigations. Use by other specialist teams within HMRC is under consideration.

The changes

The new procedure is wholly civil, removing the threat of prosecution for the original tax offence – a change from the Inland Revenue’s Hansard procedure. HMRC will retain the option to consider prosecution for a materially false disclosure or materially false statement with intent to deceive.

Interviews will no longer be conducted under caution and tape recorded.
Investigations under the new Civil Investigation of Fraud procedure will cover both direct and indirect taxes where appropriate.

Outline of the Civil Investigation of Fraud procedure

Where HMRC suspect serious tax fraud and decide to proceed civilly rather than with a criminal investigation, the taxpayer will be given one opportunity to secure maximum benefit from making a full disclosure of all irregularities within the direct and indirect tax regimes. If they take that opportunity the investigation will proceed more quickly, efficiently and advantageously for both the taxpayer and HMRC.

If a taxpayer decides not to make a full disclosure and co-operate, HMRC will conduct their own investigation, using statutory information powers if necessary. If irregularities are discovered they will issue formal assessments and pursue collection of unpaid tax with interest. Any penalties due are likely to be significantly higher to reflect the fact that the taxpayer did not take the opportunity given to them to disclose.

Once the decision in HMRC has been made to follow a civil route for investigation and the procedure is offered to the taxpayer, HMRC retains no underlying threat of prosecution for the original tax loss.

Prosecution for tax fraud

HMRC reserve complete discretion to pursue a criminal investigation with a view to prosecution where they consider it necessary and appropriate. Where HMRC decides to use the Civil Investigation of Fraud procedure it will not prosecute for the original tax offence. However if materially false statements are made or materially false documents are provided, with intent to deceive, HMRC may conduct a criminal investigation with a view to a prosecution of that conduct.

Single meetings to discuss indirect and direct tax matters

Once the new procedure is introduced, where suspicions of irregularities cut across direct and indirect taxes, one single meeting will be held to cover all regimes. During the meeting it will be made clear to the taxpayer whether questions are relevant to direct taxes, indirect taxes or both.

Disclosure Reports

Any disclosure reports prepared by professional advisers will now be expected to cover direct and indirect tax irregularities in the same document. We anticipate there will be cost savings and other benefits to the taxpayer in submitting a single disclosure report.

Civil Investigation of Fraud and the Human Rights Act

We believe the new procedure is compliant with the Human Rights Act. The civil fraud processes previously operated in both departments have received considerable scrutiny in terms of Human Rights and, in particular, Article 6 - Right to a Fair Trial. The views of the courts in the lead Human Rights Act rulings of Han & Yau and Gill & Gill together with advice from leading counsel have provided the principles for designing the new procedure. The recent case of Khan v Commissioners of Customs and Excise (2005) has endorsed these principles and safeguards have been built into the new procedure.

Consultation

This change is being made after consultation with relevant Representative Bodies.

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Amendment to Tax Bulletin 73

Finance Act 2004 – Offshore Funds Legislation (Investment Restrictions) - the first two paragraphs after the second bullet point have been re-written to clarify the position, which is as follows:

"The limit in section 760(3)(a) ICTA remains – an offshore fund may not hold more than 5% of its assets in other offshore funds. This is subject to paragraph 6 Schedule 27, which allows a fund to disregard for this purpose any holding in an offshore fund which could itself qualify for distributor status.

However, from the first fund’s perspective, a second tier fund can only be considered as being a distributing fund if it could qualify as such without the paragraph 6 Schedule 27 modification. Therefore, if offshore fund A invests more than 5% of its offshore fund B and B does likewise in offshore fund C, then A cannot qualify for "distributor status", even though fund B could still qualify for "distributor status" in its own right, using the paragraph 6 Schedule 27 modification. The 2004 legislation makes no changes to this aspect."

Prosecutions

HMRC has a policy of selective prosecution involving the most serious cases across the whole range of the tax system. The Board sees this as an important part of its strategy to deter fraud and evasion. As part of the wider publicity for this strategy, details of prosecutions are occasionally published in Tax Bulletin.

22 years for £40 million fraud gang

Jail sentences totalling 22 years were recently handed down to four people guilty of stealing £40 million in a complex "carousel" VAT fraud, following an eighteen month investigation by HM Revenue & Customs (HMRC).

Passing sentence, Her Honour Judge Williams said:
"It was an audacious and outrageous fraud… all defendants showed a shameless dishonesty."

Assistant Chief Investigation Officer Deborah Hayman said:

"Tackling Missing Trader Intra-Community (MTIC) fraud is HMRC’s top VAT priority. It was a deliberate attack on the VAT system, perpetrated by organised criminals operating across and beyond the EU. The sentences imposed clearly illustrate that the courts agree that this attack on our Revenue systems is serious crime.

HMRC will continue to dismantle and prosecute these organisations, and will also vigorously pursue the recovery of their criminally derived assets."

The scam, which continued for over two years, involved buying mobile phones from twelve fictitious companies and using false receipts to charge VAT on the transactions, resulting in a loss to HM Revenue & Customs of more than £40 million. The proceeds from this crime were then sent to the Hong Kong bank accounts of a number of companies created to perpetrate the fraud.

All four defendants faced two charges, of cheating the public revenue with intent to defraud, and money laundering.

Musician Stephen Pigott, whose recording credits include star names such as Celine Dion, Rod Stewart and The Pet Shop Boys received nine years on each count to run concurrently.

Stacy Haber-Hofberg, a former environmental judge in New York received six years on each count to run concurrently.

In addition both Pigott and Haber-Hofberg were both disqualified from holding the position of company director for the next fifteen years.

Joanna Harris and Theresa Igbanugo both received three and a half year sentences on each count to run concurrently. They were also both disqualified from being a company director for ten years.

This case was successfully prosecuted by the newly established Revenue and Customs Prosecutions Office (RCPO). RCPO is an independent prosecuting authority which reports to the Attorney General, and is responsible for the prosecution of all HMRC cases in England and Wales.

Inland Revenue Statements of Practice and Extra-Statutory Concessions issued between 01/08/2005 to 30/09/2005.

Extra Statutory Concessions

There have been no Extra Statutory Concessions for this period

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Statements of Practice

There have been no Statements of Practice for this period

You can get the latest copies of SPs and ESCs by telephoning Chandra Chandramohan, on 020 7147 2363.

Content

The content of Tax Bulletin gives the views of our technical specialists on particular issues. The information published is reported because it may be of interest to tax practitioners. Publication will be six times a year, and include a cumulative index issued on an annual basis.

  • You can expect that interpretations of the law contained in the Bulletin will normally be applied in relevant cases, but this is subject to a number of qualifications.
  • Particular cases may turn on their own facts, or context, and because every possible situation cannot be covered, there may be circumstances in which the interpretation given here will not apply.
  • There may also be circumstances in which the Board would find it necessary to argue for a different interpretation in appeal proceedings.
  • The Bulletin does not replace formal Statements of Practice.
    The Board’s view of the law may change in the future. Readers will be notified of any changes in future editions.
  • All the names used in examples and illustrations are imaginary and have no relation to real persons, living or dead, except
    by coincidence

Nothing in this Bulletin affects a taxpayer’s right of appeal on any point.
Letters on any article appearing in Tax Bulletin should be sent to the Editor,

Mr Shell Makwana, Room 2C/09,
100 Parliament Street, London, SW1A 2BQ or

Shell Makwana We are sorry though that neither he nor our contributors will normally be able to enter into correspondence about Tax Bulletin or its contents.

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Jayne Harler

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