Thoene
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 June 2016 |
| Neutral Citation | [2016] UKFTT 454 (TC) |
| Date | 24 June 2016 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Anne Redston, Mr Nigel Collard
The appellant appeared in person
Ms Hellie Lai and Mr Jeremy Taylor, of HM Revenue and Customs' Appeals and Reviews Unit, appeared for the respondents
Income tax – Whether enquiries opened within time limit – Whether appellant within agency rules – Whether agency rules deem a single employment for all assignments – Whether each assignment deemed to be a separate employment – Position if two or more consecutive assignments to the same client – Interaction between agency rules and employee travel rules – Meaning of holder of the employment – Whether agency workers entitled to tax relief on journeys from home to first location and from last location back home – Correct tax treatment of other expenses and capital expenditure – Appeal dismissed.
The Appellant appealed against amendments made by HM Revenue & Customs (HMRC) to his self-assessment (SA) returns for the four years ending 5 April 2011. The substantive issue was whether he should be allowed tax relief for his costs because he contented he was a self-employed nurse and his base was at home. The court decided that the services he had provided came within the agency rules at Income Tax (Earnings and Pensions) Act 2013 (ITEPA 2003), s. 44. This required that his services be treated for income tax purposes as the duties of an employment and the court therefore refused the appeal.
Mr Thoene appealed against amendments made by HM Revenue & Customs (HMRC) to his self-assessment (SA) returns for the four years ending 5 April 2011. The extra tax payable totalled £9,055.14.
The substantive issue was whether Mr Thoene should be allowed tax relief for his costs, which included travel, telephone charges, clothing and the purchase of a computer and other equipment. Mr Thoene's main submission was that he should be entitled to the tax reliefs because he was a self-employed nurse and his base was at home. He worked for two agencies SCL and ARSL.
The court decided that the services Mr Thoene had provided came within the agency rules at Income Tax (Earnings and Pensions) Act 2013 (ITEPA 2003), s. 44. This required that his services be treated for income tax purposes as the duties of an employment.
To come within ITEPA 2003, s. 44, a person must satisfy subsections (1)(a) to (d); The court have referred to these as conditions (a) to (d) and taken each in turn, in the light of the facts already found.
Condition (a) is that an individual (the worker) personally provides, or is under an obligation personally to provide, services (which are not excluded services) to another person (the client).
Condition (b) is that the services are supplied by or through a third person (the agency) under the terms of an agency contract. This is not in dispute: Mr Thoene accepted that the he was providing services as an agency nurse under his contracts with SCL and ARSL.
Condition (c) is that the worker is subject to (or to the right of) supervision, direction or control as to the manner in which the services are provided. A clause makes this an explicit condition in the ARSL contract.
The court decided that it was also a condition of the SCL contract, because Mr Thoene had to comply with the procedures as to how he carried out his work, whether in the hospitals or in the community. In the hospital, he worked under the supervision of a charge nurse; in the community, he worked under the supervision of the senior fulltime nurse running that team. It would be surprising if this were otherwise, given that Mr Thoene was working as a Band 5 or 6 staff nurse within a hospital or community based team.
Mr Thoene also fulfils condition (d): the remuneration receivable under or in consequence of his agency contracts does not otherwise constitute employment income. In other words, he is not an employee of the agencies or the clients for which he works.
Mr Thoene therefore meets the four conditions in ITEPA 2003, s. 44(1). In consequence, s. 44(2) provides that his services are to be treated for income tax purposes as duties of an employment held by the worker with the agency and the remuneration therefrom is to be treated for income tax purposes as earnings from that employment.
The court also decided that each of his two assignments was deemed to be a separate employment and went on to consider the interaction between ITEPA 2003, s. 44 and the travel rules at ITEPA 2003, s 337–9. Having done so, the court decided that Mr Thoene was entitled to tax relief on travel between his home and his patients' houses, contrary to the view expressed in HMRC's Employment Income Manual (EIM) at EIM32130. However, Mr Thoene had not quantified that part of his claim. It was also found that daily travel allowances paid tax free by one of the agencies for which Mr Thoene worked were in fact taxable, again contrary to the position taken by HMRC.
Taking both into account, the court decided it was not appropriate to adjust HMRC's amendments to his SA returns to either increase or decrease the tax chargeable following HMRC's amendments to Mr Thoene's returns.
The court also found that Mr Thoene was not entitled to deductions for his other claimed expenses or to capital allowances on his computer and other equipment.
For the above reasons the appeal was refused.
This case adds clarity to the difference between self-employed contractors and agency workers. This is often a contentious area but critical to understand for both parties to an agreement to ensure the correct treatment of expenses and taxes from the offset.
[1] Mr Thoene appealed against amendments made by HM Revenue & Customs (HMRC) to his self-assessment (SA) returns for the four years ending 5 April 2011. The extra tax payable totalled £9,055.14.
[2] The substantive issue was whether Mr Thoene should be allowed tax relief for his costs, which included travel, telephone charges, clothing and the purchase of a computer and other equipment. Mr Thoene's main submission was that he should be entitled to the tax reliefs because he was a self-employed nurse and his base was at home.
[3] We decided that the services Mr Thoene had provided came within the agency rules at Income Tax (Earnings and Pensions) Act 2013 (ITEPA), s 44. This required that his services be treated for income tax purposes as the duties of an employment.
[4] We also decided that each assignment was deemed to be a separate employment and went on to consider the interaction between ITEPA s 44 and the travel rules at ITEPA s 337–9. Having done so, we decided that Mr Thoene was entitled to tax relief on travel between his home and his patients' houses, contrary to the view expressed in HMRC's Employment Income Manual (EIM) at EIM32130. However, Mr Thoene had not quantified that part of his claim. We also found that daily travel allowances paid tax free by one of the agencies for which Mr Thoene worked were in fact taxable, again contrary to the position taken by HMRC.
[5] Taking both into account, we decided it was not appropriate to adjust HMRC's amendments to his SA returns to either increase or decrease the tax chargeable following HMRC's amendments to Mr Thoene's returns.
[6] We also found that Mr Thoene was not entitled to deductions for his other claimed expenses or to capital allowances on his computer and other equipment.
[7] We dismissed Mr Thoene's appeal and upheld HMRC's amendments to his SA returns. We gave our decision, with summary reasons, orally at the hearing. Mr Thoene expressed his dissatisfaction and asked for this full decision.
[8] On 3 March 2015 Mr Thoene appealed against HMRC's amendments to his SA returns. HMRC refused the appeal by letter dated 25 March 2015 and offered Mr Thoene a statutory review under Taxes Management Act 1970 (TMA) s 49C. The letter also stated that Mr Thoene could, in the alternative, notify his appeal directly to the Tribunal within 30 days of the date on the HMRC letter.
[9] Mr Thoene received HMRC's letter on 28 March 2015. He completed a Notice of Appeal to the Tribunal. Although dated 24 April 2015, the Notice was sent by email on 27 April 2015. Mr Thoene did not attach HMRC's letter of 25 March 2015 to his Notice, and so failed to comply with rule 20(3) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules); the requirement to attach the HMRC decision under appeal is highlighted on the Notice and in the relevant guidance.
[10] The Tribunals Service therefore returned the Notice to Mr Thoene with a covering email stating in bold type that the original time limit still applied and that if Mr Thoene resubmitted the Notice, he must include an explanation as to why it was late.
[11] On 30 April 2015 Mr Thoene re-sent the Notice to the Tribunal with the HMRC letter attached. On 12 May 2015 the Notice was again returned to him, because he had not given reasons why the appeal was late. On the following day he advised the Tribunal by email that the original Notice had been submitted on time, within 30 days of receipt of HMRC's letter, and this was taken to be his explanation as to why the appeal was late.
[12] TMA s 49H provides that a person who is offered but refuses a review must appeal to the Tribunal within the acceptance period. This is defined in TMA s 49C as follows (emphasis added):
the period of 30 days beginning with the date of the document by which HMRC notify the appellant of the offer to review the matter in question
[13] Mr Thoene's original Notice of Appeal was therefore late, because HMRC's letter was dated 25 March 2015 and the Notice was not received by the Tribunal until 27 April 2015. The Notice was then further delayed because of Mr Thoene's failures to comply with the Tribunal Rules.
[14] We considered the tests set out by Morgan J in Data Select...
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