Weekly Tax Update - Monday 5 March 2012

1. PAYE AND EMPLOYMENT MATTERS

   1.1. NI for certain lecturers, teachers, instructors and those working in a similar capacity

   SI 1978/1689 and the Social Security (Categorisation of Earners) Regulations (Northern Ireland) 1978 (SR 1978 No. 401) automatically categorise certain types of workers as 'employed earners' for National Insurance contribution (NICs) purposes which means payments to them must be subject to Class 1 NICs even though they are considered self-employed for tax and employment purposes. This applies to certain persons working in educational establishments such as teachers, lecturers and instructors as well as those who pay them. The Regulations do not apply to Income Tax and apply primarily for the purpose of protecting contributory benefit entitlement.

   HMRC's interpretation of the Regulations as a result of a High Court case 'St John's College School, Cambridge v Secretary of State for Social Security (Unreported) [CO/3246/99]' was that they applied in certain circumstances to some vocational and recreational tuition. Subsequent guidance to that effect has caused considerable confusion.

   Following consultation, the regulations will be withdrawn with effect from 6 April 2012 for lecturers, teachers, instructors or those in a similar capacity.

   www.hmrc.gov.uk/tiin/tiin-lecturers-teachers.pdf

2. BUSINESS TAX

   2.1. Boosting transparency around tax disputes

   HMRC has announced new governance arrangements for significant tax disputes, to provide greater transparency, scrutiny and accountability.

   The new arrangements address the issues highlighted by the Public Accounts Committee in its report in December 2011, in a way that is workable and cost-effective, without undermining the core tax principles of taxpayer confidentiality and effectiveness of collection.

   The new arrangements include:

   The appointment of a new assurance Commissioner responsible for overseeing all large settlements and protecting the interests of taxpayers at large. This Commissioner will have no role in any taxpayer's individual affairs. New rules which ensure that all cases above £100 million will now be referred, with recommendations from a panel of senior tax professionals, to three tax expert Commissioners, one of whom will be the assurance Commissioner. At present, a Commissioner decision is routinely required for settlements of £250 million or more. This change will almost double the number of cases that will be scrutinised by Commissioners. A systematic review programme, overseen by the new assurance Commissioner, of the processes used in settled cases covering all our tax settlement work. An enhanced role for the department's Audit and Risk Committee in overseeing HMRC's tax settlement work. This committee is chaired by a Non-Executive Director with relevant experience and includes representation from the National Audit Office. Greater transparency including a new code of governance for all tax disputes and an annual report on HMRC tax settlement work. David Gauke MP, Exchequer Secretary to the Treasury, said:

   "I welcome HMRC's new governance arrangements, which will ensure a clearer separation between those who attempt to reach settlements and the Commissioners who consider them. Settlements form an important part of HMRC's large business strategy. This internationally recognised approach has not only led to an increase in tax collected in recent years, it is contributing to the Government's drive to make the UK more competitive in a global market. This will continue to be vitally important as we work to rebuild our economy."

   Lin Homer, HMRC Chief Executive said:

   "The new Commissioner will be appointed as Second Permanent Secretary and will provide assurance that is entirely separate from HMRC's day-to-day casework and customer engagement. This Commissioner will take the role of challenging whether any proposed settlement secured the correct amount of tax efficiently and that taxpayers had been treated even-handedly. The Commissioner will also make sure that the governance procedures have been followed. If agreement cannot be reached there could be further negotiation or litigation. This deals with one of the Public Account Committee's key concerns – and in a way that is practical, affordable and does not require legislation.

   "The governance, auditing and reporting of the settlement process will be much more transparent. A new code of governance – covering the range of tax settlements with HMRC customers – will be published and this will set out the processes for ensuring that appropriate challenge is built into decision-making and that the approach is even-handed."

   www.hmrc.gov.uk/about/briefings/managing-tax-disputes.pdf

   2.2. OTS - Recommendations to simplify UK's tax system for small businesses

   The Office of Tax Simplification (OTS) has published its recommendations to ease the tax system burdens imposed on small businesses.

   The recommendations include both technical and administrative simplifications and are made to help the small business sector deal more easily with their tax obligations.

   The OTS has focused this review on three key areas: HMRC's administration; disincorporation; and simplified taxation for the very smallest businesses (those with turnover under £30,000). The key recommendations for each area are:

   Tax Administration - the OTS has found clear scope for changes to be made in the way the tax system is run that will make a genuine difference. There is much that is working well, and HMRC already have a range of initiatives in...