We have discussed several times in these pages the need to consider employment status in the round. A recent employment tribunal appeal highlights these issues very well: it also shows that it can be surprisingly difficult to establish the facts – let alone draw the right conclusions from them.
The case concerned a support worker in the health care industry, working (to use a neutral term) for a private company, not the NHS. He had been employed under a conventional employment contract but at some point he started to work through one or more limited companies. That new arrangement gave him higher net earnings – partly because the health care company appears to have shared some of its NIC savings with him but also because he was able to access his money in the form of lower taxed dividends. As often happens in these cases the arrangement gives advantages to both parties while the relationship works well; but problems arise when it breaks down. This is what happened here. The individual was suspended without pay on the basis that he was not an employee. He then took the ‘employer’ to a tribunal on the basis that he was forced to enter into the new contractual arrangements by the ‘employer’, that they were a sham and that he was still an employee, doing exactly the same work as he had previously done.
At the first hearing the judge dismissed these arguments as ‘totally incredible and thoroughly dishonest’ and said that they were a ‘laughably unbelievable explanation’. Given that the judge did not give any reasons for these very strong comments it is not surprising that the case went to appeal. In the appeal the new judge started by trying to establish the facts: this was far from easy. Only a few documents were available. Some of these were unsigned or were so badly printed that they could not actually be read. As noted above the individual seems to have been involved with two separate personal companies but quite what his relationship was with either of them was not clear and which, if either, actually provided his services to the end user was a mystery. The arrangement had all of the hallmarks of something hastily put in place at the instigation of the ‘employer’ without any real care and attention. The individual clearly had no idea of the true position but was happy to go along with it while it gave him more money. Such arrangements are in our experience not uncommon.
So what was the outcome? Unfortunately there is no clear answer. The appeal judge decided that the only thing to do was to start the whole process again and sent the case back to another tribunal to do the job properly – ie to establish the facts once and for all and then to make proper conclusions on the law based on those facts.
So why do we comment on a judgement without a clear outcome? We do so because this messy case, where it is far from clear what actually happened and where the interests of the parties sometimes coincide and sometimes are in conflict, is typical of the realities that tax and employment law has to deal with. There are no simple answers. Next time you hear a politician or commentator talk about employment status in black and white terms think about this case and others like it. How would you devise a simple test to prove this person’s status?
This week a ring bought for £10 at a car boot sale 30 years ago was put up for auction as it turns out the piece – thought to be costume jewellery – was actually a real diamond ring worth around £350,000.
This made me think about the arbitrary 31 March 1982 revaluation for capital gains purposes. There will be tax of around £70,000 to pay on the increase in value of the ring from its £10 original cost. However, if the owner had bought the piece before 31 March 1982 (or even on the day) they could have used a base cost equal to the market value on that day and therefore the capital gain tax requirement would have been considerably lower.
The rebasing was introduced because indexation allowance was being introduced at the same time and there was a desire to ensure that gains due to general inflation weren’t being taxed. Indexation has been long gone for capital gains tax – but maybe it’s time for a general rebasing? It might seem fair, but I suspect I have more chance of finding another £350,000 ring for £10.
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