In Mr Remi Ashton v HMRC [2016] UKFTT TC05456 the First Tier Tribunal agreed that the taxpayer was an employee and not a partner of a partnership.
A person is a partner of a partnership if they are carrying on a business in common with one or more persons with a view to profit (Partnership Act 1980 s1).
- Karate World is a martial arts instruction business.
- It was originally a sole-trader business with employees, run by Mr Thompson.
- In October 2003 Mr Thompson transferred the business to a partnership, making a number of employees, including Mr Ashton, partners.
- Partnership Returns were submitted which showed Mr Ashton as a partner, and he submitted self-assessment Returns as a partner.
- Following an enquiry into Mr Ashton’s 2010/11 Return HMRC issued assessments for additional tax due to a mismatch of basis periods and disputed expenses.
- Mr Ashton appealed on the basis that he was an employee and not a partner.
The FTT first considered whether Mr Ashton was in partnership, carrying on business in common with Mr Thompson with a view of profit. They decided that he was not:
- He had not entered into a partnership agreement.
- He received a basic pay and bonus amount based on business turnover.
- There was no indication that he would not receive these amounts if the business made losses.
- There were no partnership meetings.
- He did not receive copies of partnership accounts.
- He was expected to deal with his own expenses for uniform, training shows and high quality weapons.
The FTT also considered whether he was an employee or self-employed. They decided he was an employee as there was clear mutuality of obligation between the parties:
- Documentation describing him as self-employed is inconclusive; the actual relationship between parties is more important than the description of it.
- Mr Thompson controlled the content and structure of classes which is indicative of employment.
- Mr Ashton received payment for holidays and sick-leave which is not consistent with self-employment.
- Mr Ashton did not organise his own cover when he was away or sick but in the circumstances this was not considered to be indicative of either employment or self-employment.
- There was no significant change in the relationship between Mr Ashton and Mr Thompson in 2003, when Mr Ashton was told he was to be self-employed.
- Mr Ashton merely did what he was told to do, and there was no evidence that it was the intention of the parties that their relationship from 2003 onwards should be one of self-employment.
Comment
This case pre-dates the 2014 Salaried Partners legislation which taxes salaried partners as employees: the taxpayer would now be taxable under PAYE. It is of interest as it provides an up to date interpretation of employment status, an ongoing issue for workers who have to self assess IR35.
Links
Case reference Mr Remi Ashton v HMRC [2016] UKFTT TC05456
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