PAYROLL
Was the right decision reached? In an employment tax related case it’s not usually tax tribunal’s practice to consider non-employment tax related tax legislation, as happened with the expenses here. It may well have seemed equitable to allow for part of the expenses because Mr Kunjur carried out some of the work he was contracted to do at the flat. However, the fact remains that the expenses were not ‘wholly, exclusively and necessarily’ incurred under the strict employment tax tests set down in law under Section 62 of ITEPA 2003.
be ‘in performance of’ his employment duties. The fact he was on call while living in the flat influenced the decision heavily. So did the fact that members of his family didn’t visit the premises whenever he was staying there, or at weekends, for the duration of the lease. However, the fact remains that the premises could have been used for a private purpose to a much greater extent if Mr Kunjur had been so inclined. The property was let exclusively to Mr Kunjur and was thus available to him to use privately, whether he did or not. The tribunal also unusually chose to examine the scenario for a self-employed person. This was possibly influenced by the fact Mr Kunjur had paid the costs of the living accommodation himself and was claiming tax relief on them. The legislation at Income Tax (Trading and Other Income) Act 2005 allows for an apportionment to be made between private and business expenses. It appears the FTT went on to direct HMRC and Mr Kunjur to decide between themselves on how the private use apportionment of the costs should be sensibly calculated based on this legislation. This is nothing to do
with employment tax legislation (under which Mr Kunjur’s student contract could be said to be governed). In an employment tax related case it’s not usually tax tribunal’s practice to consider non-employment tax related tax legislation Penalties: dismissed The tribunal also considered that the penalties should be wholly dismissed because the taxpayer had relied upon his accountants to get his tax return right – which is probably the right outcome. Several other case decisions have reached the same conclusion. Mr Kunjur’s claim was made based on advice received from his accountants and was also completed by them.
Conclusion This is a surprising outcome, and it
wouldn’t be advisable to rely on it – the fact it’s an FTT decision also means it hasn’t set any precedents. It’s likely HMRC will allow it to go unchallenged without bothering to appeal, due to the small amount the taxpayer is due to receive back. On the other hand, HMRC may consider that if a substantial amount of similar claims are likely to be made by other taxpayers on their tax returns because of this decision, it could be necessary to attempt to have the decision overturned, as a deterrent. n
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| Professional in Payroll, Pensions and Reward |
Issue 81 | June 2022
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