Selection of recent Tax Tribunal Cases

Valid dispensation in place covering subsistence expenses

Case details: NWM Solutions Ltd V HMRC [2023] TC08788

The case centred around whether scale rate payments made by the employer NWM Solutions Ltd (NWM) to its employees, which were covered by a valid dispensation issued by HMRC, should have been subject to tax and Class 1 National Insurance Contributions (NIC).

HMRC contended that NWM had not met the conditions of the dispensation and that the payments made to the employees were not reimbursement of expenses incurred but were round sum allowances which should have been subject to tax and Class 1 NIC. HMRC issued formal determinations covering the tax years 2013-14, 2014-15 and 2015-16 and NIC decisions, naming specific employees.

The Tribunal found that the payments were not round sum allowances and therefore would not be subject to tax and Class 1 NIC. The Tribunal was satisfied that the employees had incurred subsistence expenses and accepted that NWM had ‘sense-checked’ the employees’ expenses claims by checking mileage and timesheets, requiring travel receipts, and monitoring temporary workplaces. NWM had met the purported qualifying conditions of the dispensation.

Even if NWM had breached the dispensation conditions, it is not open to HMRC to issue determinations and decisions without first revoking any dispensation in place. The dispensation in question remained in force for the whole period covering the determination and decisions issued.

The appeal was allowed.

No good reason for serious and significant delay

Case details: Cranham Sports LLP V HMRC [2023] TC08794

Cranham Sports LLP applied to the Tribunal to make a late appeal against tax determinations and Class 1 National Insurance Contributions (NIC) decisions raised by HMRC.

Barry Cowan, a former professional tennis player, is a member of Cranham Sports LLP and performed services as a tennis commentator for Sky through the LLP. During their enquiry with the LLP, HMRC issued an opinion that it considered that the IR35 legislation applied to the hypothetical contract between Mr Cowan and Sky.

HMRC issued tax determinations and NIC decisions on 17 November 2021, which were appealed within the prescribed time limit of 30 days. HMRC issued its view of the matter letter dated 9 December 2021, advising that it upheld the determinations and decisions issued and if the LLP disagreed it had 30 days from the date of the letter to accept an offer of review or to appeal to the Tribunal. As no request for a review was forthcoming and no notification was made to the Tribunal, HMRC considered the appeals were settled.

An appeal was received by the Tribunal on 10 March 2022, some 60 days late. The Tribunal looked to apply the three-fold test set out by William Martland v HMRC to consider whether to grant permission for a late appeal – the tests being the length of delay, the reasons for the delay and all circumstances of the case.

Taking all details into account, the Tribunal found that it was not persuaded to grant permission, as the delay in filing the appeal was long enough to be considered serious. Additionally, there were no adequate reasons for the delay, and rather than seek to remediate the position as soon as possible, the representative continued to lock horns with HMRC.

The appeal was refused, meaning that Cranham Sports LLP is liable to pay the tax determinations and NIC decisions raised by HMRC in respect of the IR35 legislation considered applicable.

CJRS claims invalidated by social media posts

Case details: Glo-Ball Group Limited V HMRC [2023] TC08823

The company, Glo-Ball Group Limited, appealed against assessments raised by HMRC regarding payments made to the company under the Coronavirus Job Retention Scheme (CJRS) between 23 April 2020 and 18 December 2020 regarding one of its directors and employees, Michelle Dowler (MD).

For the purposes of a CJRS claim, a furloughed employee was one which, in addition to other conditions, had ceased all work for the employer for 21 calendar days or more.

Whilst on furlough, MD posted a number of small posts on the company’s Facebook page during the periods March 2020 to June 2020, August 2020 to September 2020, and November 2020 to January 2021, which HMRC considered amounted to work for the purposes of the Scheme and did not qualify as ‘Statutory duties’ of a director under the Companies Act.

The Tribunal found that the social media posts did amount to work and that MD was not a furloughed employee throughout the period of the claim. As MD had not ceased all work during the ‘classic period’ of 1 March 2020 to 30 June 2020, she was not an eligible employee for CJRS payments under the flexible furlough scheme for the period of 1 July to 31 October 2020 and, as work was carried out in November 2020, MD was not a furloughed employee.

The appeal was dismissed.

Payment was on account of disability resulting in adjusted income below HICBC

Case details: Nicky Howard-Ravenspine V HMRC [2023] TC08831

This case involved the High Income Child Benefit Charge (HICBC) which HMRC considered the appellant was due to pay, as her net income for 2016-17 tax year exceeded £50,000. During the tax year in question, the appellant had received a termination payment from her employer, and it was her view that part of this payment fell within the disability exemption in section 406(1)(b) ITEPA 2003 and, therefore, should not form part of the assessment for HICBC.

The appellant had been suffering with ill-health since June 2012 and, following discussions with her employer, a termination agreement was drawn up. A settlement payment was made on 28 April 2016 consisting of basic salary, holiday pay, PHI adjustment, and a severance payment, all of which was taxed. In addition, £83,907 relating to the Group Income Protection claim in respect of the appellant’s inability to work, formed part of the payment. Of this sum, the employer paid £30,000 tax-free whilst the balance of £53,907 was taxed.

In May 2016, the appellant made a separate claim to HMRC prior to the HICBC issue arising, as she considered she was entitled to a tax refund because the full payment of £83,907 fell within the disability exemption. The appellant did receive a refund from HMRC.

Following the issue of a HICBC nudge letter to the appellant in November 2019 and subsequent call, HMRC issued a discovery assessment on 14 January 2020 for HICBC liability due from the appellant for 2016-17 tax year. The appellant subsequently appealed to the Tribunal. 

Whilst it was not contested by the appellant, it was accepted by the Tribunal that a valid discovery assessment had been issued in time. HMRC’s remaining view was that the appellant’s adjusted net income for 2016-17 should include the full value of the termination payment which was compensation for loss of office and not on the account of her disability.

HMRC’s case centred on the High Court decision in Hasted v Horner (67TC439) and that the appellant did not satisfy both tests under s406(1)(b), so the exemption did not apply. The Tribunal did not agree with HMRC’s interpretation of these tests and referred to how these tests were interpreted and set out within HMRC’s internal guidance found at EIM13630. In essence, HMRC had interpreted the second test as an “all or nothing test”, with which the Tribunal disagreed.

The Tribunal allowed the appeal, finding that the £83,907 did fall within the disability exemption and the appellant’s adjusted net income for the purposes of the HICBC was less than £50,000.  The Tribunal also noted that, whilst it was not brought to their attention, HMRC’s own guidance at ‘EIM13637’ appears to accept the Tribunal point regarding apportionment where part of the payment does relate to disability.