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Tomlinson: HMRC says taxpayer is self-employed

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Here is a tax case that you don’t see every day: the taxpayer claimed to be an employee, but HMRC contradicted that he was self-employed and HMRC won.

In the First-tier Tribunal (M Tomlinson v HMRC [2017] UKFTT 489 (TC)), Mr Tomlinson wanted to be classed as an employee and HMRC deemed him to be self-employed for the purposes of NICs under s 8(1) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 and issued a formal notice to this effect to enable the disagreement to be resolved.
 
The taxpayer Mr Tomlinson had worked as a commission-only salesman for over 35 years. He and the company he worked for, The Window Centre (Solihull) Ltd (WCSL), (since approximately 1990) understood him to be self-employed, but Mr Tomlinson’s new adviser challenged this status as part of an ongoing tax enquiry into Mr Tomlinson’s affairs and maintained he was an employee of WCSL.
 
Both sides produced evidence in support of their argument but the factors the FTT considered key were as follows:
 
  • There was only a verbal contract between the parties and no terms and conditions.
  • Mr Tomlinson’s main job was to sell WCSL products which arose from leads that were generated by both WCSL and Mr Tomlinson himself.
  • Mr Tomlinson was paid a commission that was reduced if he offered discounts to customers in excess of 25%, or errors that he made led to problems with the job.
  • The commission was clawed back if the customer failed to pay or cancelled the order.
  • The company provided Mr Tomlinson with most of the necessary equipment free of charge but he provided his own car and mobile phone and wasn’t reimbursed for these costs.
  • Although Mr Tomlinson regularly spent time in the showroom each week there was no legal obligation for him to be there.
  • Although both parties expected Mr Tomlinson to only provide services to WCSL this was not a legal obligation.
  • Mr Tomlinson was not paid for holidays or periods of sickness.
The FTT acknowledged that in these particular circumstances the position was unclear, however the fact that both parties intended and believed that Mr Tomlinson was self-employed and operated on that basis for almost 25 years was decisive.
 
The decision was that Mr Tomlinson had not discharged the burden of proof to support his case. The FTT decided, on the balance of probabilities, that he was engaged under a contract for services and as such was self-employed during the period of the enquiry (6 April 2014 to 5 November 2015).
 
The fact that this case was not taken to an Employment Tribunal suggests that there was a tax motive to being an employee rather than an employment terms reason. An opposite mirror to the recent ‘gig economy’ type Employment Tribunal cases affecting Uber, Pimlico Plumbers and others. 
 
Linda Broomfield, Mazars (linda.broomfield@mazars.co.uk)
 
 
Issue: 1362
Categories: In brief
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