The recent release by the First-Tier Tax Tribunal of the judgment in the case of Nigel Ratcliffe v HM Revenue & Customs (http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=7337) highlights the importance of the contractual arrangements in place and their detail. The contractual arrangements are fundamental in an array of circumstances none more so than where the temporary workplace rules and expenses are concerned.
The dispute concerned amendments to Mr Ratcliffe’s 2008/09 self-assessment liability and rested on the question of whether he had worked at permanent or temporary workplaces. Mr Ratcliffe had claimed mileage allowances for travel in his own car to and from these workplaces against his employment income. In error, he had claimed costs just over three times the potentially allowable entitlement (a side issue but it certainly did not help his case).
His intention was to claim relief in line with and based on the Approved Mileage Allowance Payment rates (AMAP) which at the time were 40p for the first 10,000 miles and 25p thereafter. Mr Ratcliffe was employed on and off by Granite Services International (“GSI”) over a period of 10 years to oversee the closure of power stations all over the UK.
A key factor during the period of self-assessment under scrutiny was a couple of short periods during which he was not employed by GSI. Following these spells of 2-3 weeks he was re-employed by GSI under contracts which required him to report to a specific power station. This contrasted with the initial contract covering almost 7 months of the year. This was termed a “retainer contract” and under it he was required to work at various sites for the length of the contract.
Had he not been given, offered or sought advice before signing up to the contracts (I can hear you say)? In general, the two contracts were very similar and specified that any previous periods of employment did not count as part of any period of continuous employment. Interestingly, however, the short-term contract provided for a bigger pay packet. That aside there was a clear difference between the two types of contract. The “retainer contract” required he worked whenever necessary and he was posted to a power station for two separate spells. During the interim periods he remained employed under the same contract ready and available for another assignment.
Not surprisingly, HMRC took the stance that whilst under the “retainer contract” the expenses met the temporary workplace criteria and were allowable. However, under the two short term contracts the power stations he attended constituted a permanent workplace and the expenses were not allowable.
Mr Ratcliffe also referenced a letter that HMRC had sent some years previous in response to GSI’s (at that time called Global Turbine Services) letter regarding his employment and the short-term assignments he had worked during that period. Essentially this confirmed that the expenses in respect of those short term assignments were allowable.
Mr Ratcliffe argued that because of this letter HMRC had accepted that the travel expenses incurred on short-term assignments were allowable? HMRC’s get out was predictable i.e. there was no reference to different types of contract in the letter from GSI and it gave the impression that Mr Ratcliffe was employed on a single contract. It is highly unsatisfactory that HMRC did not pursue the detail (although not uncommon) and another example of their ability to ‘row back’ from any situation (all the way to the boathouse in many circumstances). But that is a separate matter and one for another day I suppose.
The Tribunal dismissed Mr Ratcliffe’s appeal against the amended self-assessment liability of £1795.60.
The case is a good reminder of the need to ensure you have the correct contractual arrangements in place for the temporary workplace rules to kick-in.
Disclaimer: Acumen Legal has drafted this blog update to provide you with a general overview of the relevant law and developments at the date of sending only. This blog is provided as a general overview and should be taken as such. It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.
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