HMRC audit going badly

[xoggoth]

From what I have read, accept their interpretation for 1 year just to avoid the hastle and you find that is only the start, they will assess the other years on the same basis.

It really is irrelevant what some act, internal guidance or reinterpretion says, Booklet 490 is still their official guidance to the taxpayer. I am aware there are weasely little words in it about text should not be relied upon but if anyone is investigated for following the main taxpayer guidance document that has been unchanged on that issue for some years there is something seriously wrong. Launch an official complaint if they try that one.

This may be worth £10 in my view:

http://www.tax-hell.co.uk/buy-the-ebook/


PS 490 has several example. Reasonably clear in my view.

[Taxless]

From what I have read, accept their interpretation for 1 year just to avoid the hastle and you find that is only the start, they will assess the other years on the same basis.

It really is irrelevant what some act, internal guidance or reinterpretion says, Booklet 490 is still their official guidance to the taxpayer. I am aware there are weasely little words in it about text should not be relied upon but if anyone is investigated for following the main taxpayer guidance document that has been unchanged on that issue for some years there is something seriously wrong. Launch an official complaint if they try that one.

This may be worth £10 in my view:

Buy the ebook | Tax Hell


PS 490 has several example. Reasonably clear in my view.

On the basis that this is an enquiry we have the concept of drawing a line in the sand, particularly if they are looking to make a contract settlement.

You are agreeing what is payable and that this covers all periods up to and including the present, so if they offer to settle on 1 year it may be worthwhile.

From what has been said it sounds like they may be pushing for agreement in principle that their interpretation is correct, then they may look at earlier years to quantify the total liability.

This is all part of the negotiation process and certainly isn't something that should be undertaken without professional input.

[Clippy]

What is the general consensus on how long for the clock to reset between contracts before you can/should re-contract at a previous area/geographic location/city? Is it 2yrs?

Ah no unfortunately the 40% rule then kicks in which is slightly more complicated

So, if you did a 20 month contract in London, under the 40% rule, you should avoid doing another contract in that area for at least 8 months.

[Addanc]

So, if you did a 20 month contract in London, under the 40% rule, you should avoid doing another contract in that area for at least 8 months.

I thought it was something along the following lines; if you have spent 40% or more of your time on site in the last 24 months you are not entitle to claim travel expenses.

[centurian]

So, if you did a 20 month contract in London, under the 40% rule, you should avoid doing another contract in that area for at least 8 months.

Yes, but only if the new contract is a very short one - you don't get another 2 years. It doesn't restart the clock back to zero.

I recall someone having a fancy spreadsheet that would do the calculations

[centurian]

My accountant’s legal team has told me that the HMRC are clamping down on such claims, especially as when the value is considered as being quite high; the argument they are presenting relies on section 339(7) of the ITEP act 2003, which is being interpreted in a very broad sense. The HMRC are disallowing my claim for travel and subsistence on the grounds that no substansive work was carried out at my home address/the registered office of my limited company. This goes against everything I, and everyone I know has ever been told about contracting.

This is a worrying development as it sounds like HMRC are going after travel and subsistence, full stop.

So are they disallowing it on the basis of the 24 month rule - or that they just don't believe it is payable at all - 24 month rule or not.

[Fred Bloggs]

Yes, but only if the new contract is a very short one - you don't get another 2 years. It doesn't restart the clock back to zero.

I recall someone having a fancy spreadsheet that would do the calculations

So to reset the clock back to zero after I did a 23 month contract in one place I'd need to be away from there for 24 months? Must admit, this is getting much more complicated than I had thought. Luckily, I have worked in several different areas so I don't think I have this problem but it seems from this evidence HMRC might be getting more aggressive persuing this.

[LisaContractorUmbrella]

So, if you did a 20 month contract in London, under the 40% rule, you should avoid doing another contract in that area for at least 8 months.

Unfortunately not as simple as that - it works on a rolling 24 months - this is HMR&C's explanation EIM32080 - Travel expenses: travel for necessary attendance: definitions: temporary workplace: limited duration, the 24 month rule


As explained in EIM32075, a workplace that an employee attends for the purpose of performing a task of limited duration or for some other temporary purpose is a temporary workplace. But there is a further rule that prevents a workplace from being a temporary workplace where an employee attends it in the course of a period of continuous work that lasts, or is likely to last, more than 24 months. Where this further rule applies the workplace will be a permanent workplace. This rule does not apply unless the workplace is capable of being a temporary workplace as defined by S339(3) ITEPA 2003.

A period of continuous work is defined by Section 339(6) ITEPA 2003 as a period over which the duties of the employment are performed to a significant extent at that place. To apply this rule you should treat duties as performed to a significant extent at any workplace if the employee spends 40% or more of his or her working time at that place. The effect of this rule is illustrated by examples beginning with example EIM32086. The effect of this rule for part-time workers is illustrated by example EIM32092. Breaks in attendance are considered at EIM32105.

The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months. Where that is the case the workplace is not a temporary workplace and so it is a permanent workplace. Travel between that place and home will be ordinary commuting and so is not deductible.

This rule is modified where the employee works at a succession of workplaces but the change of workplace has no substantial effect on the employee's journey to work. All such workplaces are treated as the same workplace for the purpose of the legislation, see EIM32280and example EIM32089.

The legislation is written in terms of the length of time that it is reasonable to assume, or is likely, that the employee will spend at that workplace. The effect of the rule is not altered where the expectation does not match the outcome, see example EIM32083. The effect of the rule can be altered when there is a change of expectation, see example EIM32084. EIM32100contains advice on how to find out what expectation the employee may have.

Remember that the 40%/24 month rule is only a rule that treats workplaces that would otherwise be temporary workplaces as permanent workplaces. It does not apply to a workplace that is not a temporary workplace because it does not meet the definition in EIM32075. This is illustrated by example EIM32087. Even though the employee in that example works in Dolgellau for only 20% of her time it is not a temporary workplace because she does not work there for a limited duration or for a temporary purpose.

When considering whether a workplace is a temporary workplace, you should also consider the other tests listed at EIM32075


HTH

[Fred Bloggs]

Thanks Lisa, clear as mud. Even simple things are complicated beyond all sense and reason it seems. No wonder folks get it wrong.

[LisaContractorUmbrella]

Thanks Lisa, clear as mud. Even simple things are complicated beyond all sense and reason it seems. No wonder folks get it wrong.

Yep sorry about that Fred See what exciting things accountants get to read