The taxpayer company was wholly successful at the FTT in a case concerning the old requirement for employers to put dispensations in place (NWM Solutions Ltd v HMRC [2023] UKFTT 364 (TC)). As the dispensation rules no longer apply, the case is mainly of academic interest now.
The essence of the problem was that the company had been paying scale rates for meals but had not been checking whether employees had really been buying the meals in the first place. HMRC were seeking some sort of receipt for each meal.
The FTT was unpersuaded by HMRC’s arguments:
“… stepping back from the details, we found ourselves in agreement with [Counsel for the taxpayer, David] Ewart’s submission that if receipts were necessary irrespective of the subsistence scale rates applying, then one wonders what benefit would be derived from having the scale rates at all. Those rates were supposed to be an administrative convenience for employers, employees, and HMRC. But the processes apparently demanded by HMRC might arguably be more onerous than claiming deductions against tax for expenses in the amounts substantiated by the receipts. That cannot be what Parliament intended when implementing the s.65 regime, and our construction of the regime and its effects are informed by that view.”
In its conclusion, the FTT added:
“… the effect of a dispensation is to remove relevant payments entirely from the scope of taxation. We therefore conclude that unless and until a dispensation is revoked, it is not open to HMRC to assess to tax any payment purportedly made under it. In this case, the parties were agreed that the Dispensation was never revoked by HMRC. Accordingly, even if HMRC were right to say that NWM was in material breach of the conditions in the Dispensation, they could not issue the Determinations and Decisions, and it would have been irrelevant even if NWMSL was found to be in material breach of the conditions purportedly contained in the Dispensation.”
The FTT therefore allowed the appeal in full and set aside the HMRC determinations and decisions.
The adviser to the company in this case was David Kirk, author of Employment Status. Leading Counsel was David Ewart, whom David (Kirk) informed us was also Counsel in the only other case on dispensations to reach the tribunal, that of Reed Employment.
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08788.html
Related content from Claritax Books
In Employment Status, author David Kirk guides the reader through the maze of apparently contradictory case law on this topic. The book includes coverage of IR35 issues, and also of topics of officers, agency workers, personal services companies and special occupations.
