This time: HMRC tell us why they missed an important employment status indicator off their Check Employment Status tool (CEST): we think it's a cop out. The CIOT voice concerns over HMRC's litigation policy "shoot first and ask questions later"?, plus some interesting tax cases.

First off, we are not here to 'bash' HMRC, we really believe that as tax professionals we should all work with HMRC and not against them. However, there are times when you need to 'call a spade a spade' and so it goes with HMRC's truly awful explanation as to why 'Mutuality of Obligation' (MOO) is excluded from its CEST employment status tool. The CEST is supposed to be the definitive route for determining whether someone who is working for you is employed or self employed, this is essential for IR35. The CEST unfortunately ignores MOO. MOO is pretty important: no MOO, no employment.

The concept of MOO? I shall explain. For example, if I am your accountant and we have agreed terms of engagement for the services that I offer and these include the provision of general tax advice, and then you ask me a fiendishly difficult tax question, I might realise that it is way too specialised for me and I may well decline to answer. Probably, I will suggest a suitable specialist. Under the unwritten terms of our relationship I can accept or decline your work according to how confident I feel about answering it accurately. You will accept that as you know that no one knows everything about tax and importantly, as you are in business, you appreciate that it can be impossible to draft a contract that covers every single question that you might ever put to me. HMRC however, think that this is not the case and our type of working contract will always specify everything. HMRC's view, according to its explanation, is that if we have a contract, we must therefore have MOO.

Now obviously, looking at my example, there is no MOO as I have turned down work. I would have thought that this is just the type of thing that the CEST would definitely resolve. This is not the case, as currently we now know that MOO is the hidden first step. You need therefore assess the MOO question before you use CEST. If there is no MOO then the CEST tool can probably be ignored. 

It goes without saying that it might have been a lot easier to have just added MOO as the first test in the CEST and not bothered to write a paper on the topic. However, now we have the paper, if you have used the CEST you probably need to go back and check for MOO. 

Do check out the piece on HMRC's litigation and settlement strategy, by co-incidence we report two cases where HMRC went to the tribunal over absurdly small amounts of tax and we need ask, what possible value there can be to taxpayers in adopting this approach? Personally I think HMRC need more technical specialists and an updated strategy.

If you have any tax queries please do try out our Virtual Tax Partner support portal at www.VtaxP.co.uk: subscribers you are entitled to free quick queries so do ask.

Enjoy the guides and updates and the news is below. 

Back soon

Nichola Ross Martin FCA CTA (Fellow) Tax Director


Your Virtual Tax Partner®: online PRACTICAL support for accountants & tax advisers BY accountants & tax advisers

Quick news (freeview)

Don't forget filing deadlines: 6 July 2018

  • ERS online filing - report share awards and options
  • P11Ds and P11D9(b) returns of benefits and NI declaration

IR35 & Mutuality of Obligation
HMRC attempts to explain why it missed Mutuality of Obligation (MOO) off its CEST tool.

CIOT: concerns over HMRC's Litigation & Settlement policy
Reporting to the Treasury Sub-committee: what's going on? HMRC is litigating even when it has less than a 50% chance of success. 

2019 loan charge: expected to affect 50,000 individuals
In a recent response to a series of parliamentary questions, the government has estimated that the number of taxpayers who will be affected by the 2019 loan charge could be just 50,000.

Scottish Museums and galleries not claiming new tax relief
A recent survey by independent charity Arts & Business Scotland and accountancy firm Scott-Moncrieff indicates that over 75% of Scottish museums and galleries have not been claiming the Museum & Gallery Exhibitions Tax Relief introduced in 2017 to encourage museums and galleries to develop new exhibitions and display their collections to a wider audience.

Case Update (freeview)

HMRC fails to disrupt R & D SEIS spin-off model
In Oxbotica Limited v HMRC [2018] TC6538 HMRC was unsuccessful in an attempt to deny SEIS relief for £1,000 of founder shares on the basis that the amount of the investment was too small to be used to for any qualifying activity.

EIS: income tax relief required for CGT exemption
In Robert Ames v HMRC [2018] UKUT 0190 the Upper Tribunal (UT) denied a CGT exemption on the sale of Enterprise Investment Scheme (EIS) shares where no claim to income tax relief had been made due to the taxpayer having only £42 of income.

PAYE discovery assessment
In Yocheved Blum v HMRC [2017] TC6404 HMRC was able to make a discovery assessment in respect of PAYE income following a taxpayer’s error on her tax return: there was nothing on the return to indicate that the taxpayer had picked off the wrong figures for her wages.

Court approves trustee decision prohibited by trust deed
In South Downs Trustees Limited v GH, IJ, KL [2018] EWHC 1064 (Ch) the High Court approved a decision by the trustees of an Employee Benefit Trust (EBT) to sell their controlling stake in the employer company despite the trust deed prohibiting it; the trustees took great care in making their decision which was in the interests of the beneficiaries.

No IHT deduction for rent liability
In Execs of Estate of D S Campbell Dec’d v HMRC [2018] TC06389, the First-Tier Tribunal (FTT) held that outstanding rents on a lease related to the deceased’s business, were deductible in calculating the value of the Business Property Relief (BPR) qualifying business and not entitled to separate relief.

Editor's Choice (subscribers)  

Professional fees and membership subscriptions
UPDATE: we have had several queries on this topic. Tax exemption for these costs whether incurred personally or by your employer

Time limits for assessment, corrections, claims and reliefs
UPDATE: a handy guide

How to appeal a tax penalty
UPDATE: the devil is in the detail, this guide shows you what to check and how to draft a comprehensive appeal

Tax Guides and Updates (subscribers) 

EMI: Enterprise Management Incentives
UPDATE: for more details about the need for the employee to complete a working time declaration.

FAQs for Disguised remuneration
UPDATE: We have added a couple of new FAQs regarding deductions for settlement payments and what happens when the individual is now non-resident.

UK trusts
UPDATE: HMRC have provided more guidance on trust registration deadlines and requirements which we have added to our guide.

VAT (freeview)

VAT clarifications for mail order retailers
HMRC has issued new guidance on when goods are supplied on approval and how this impacts the time of supply and postage costs for VAT.

Handicap system is essential to golf
In Abbotsley Limited & Others v HMRC [2018] UKUT 0191, the Upper Tribunal (UT) found that the CONGU handicap system was essential to golf, such that the fees paid towards its administration are exempt. 

VAT (subscribers)

Education & VAT
UPDATE: the time limit for local authorities claiming VAT back on costs related to free education has been aligned with other VAT recovery time limits.

Reverse charge & MTIC fraud
UPDATE: HMRC has issued new guidance on when penalties will be issued for Missing Trader Inter-Community VAT fraud and when they will be mitigated.

Agents and principals
UPDATE: further case law added on when someone is acting as agent.

CPD Webinars

New CPD click here

Missed last time's update?

Nichola's SME Tax w-update 29 June 2018


  • P11Ds & ERS filing deadlines
  • Wholly & exclusively toolkit
  • Giving shares to directors or employees
  • Correcting mistakes by trustees
  • VAT & Disbursements: new guidance
  • and much more..

Come and join our Cloud

Subscribe (and UNLOCK the whole site) A single user annual subscription is £365 (+ VAT). 

What do you get?

  • We keep YOU up to date in SME tax.
  • FULL access to www.rossmartin.co.uk: your firm's personal TAX INTRANET containing over 2,500 actively maintained tax guides, briefings, toolkits and checklists.
  • Want to know more? Commission your own articles and checklists.
  • Structured CPD: our detailed SME tax updates "for Advisers Only" provide topical summaries and planning notes & our NEW webcasts provide you with structured CPD at your desk.
  • Regular client tax briefings: these cover the latest business and employment tax issues and are designed to assist you plan meetings and improve your client services.