Credit Management May 2022

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CICM Resource Centre Delivering the best Resources for you and your team Member Exclusive resources Whether you’re completely new to credit management or want to take your skills to the next level, our free guides, toolkits, Serrala blogs and tips are CP designed to help you enhance your knowledge, stay informed about developments and gain advice from a range of experts. Keeping you up-to-date with: Help and Advice from our Corporate Partners Money and Debt Advice / Wellbeing / Legal Advice Log in to your members area for Member Exclusive resources For details contact: info@cicm.com Brave | Curious | Resilient / www.cicm.com / May 2022 / PAGE 72
HR MATTERS Sounds Business Sense A winning IR35 tax case and an example of how a person’s conduct counts when it comes to compensation. AUTHOR – Gareth Edwards AN individual’s employment status for tax determines the taxes they pay. Individuals who avoid income tax and National insurance by supplying services through an intermediary to disguise their employment status, have been targeted in recent years under a set of tax rules. Recent case law has demonstrated how a hypothetical contract of employment between two parties contracting through a personal service company can lead to large tax bills. However, in the case of Basic Broadcasting v HMRC, the First Tier Tax Tribunal has held there to be no employment relationship between TV presenter Adrian Chiles, and two TV companies, despite mutuality of obligation and control being established. In overview, Mr Chiles is a director of his personal service company, Basic Broadcasting Ltd (BBL). He performed services for the BBC and ITV through BBL. His hypothetical contracts with each of the TV companies were lengthy and represented over 75 percent of his income (although they took up less than half his working time). In examining the relationship between Chiles and the two TV companies, the tribunal found there was mutuality of obligation, in that he was under ‘some’ obligation to work, and the TV companies were under the obligation to pay for his work. The tribunal also found that Chiles was under the TV companies control in terms of the way editorial control was exerted over the content he produced. However, the tribunal found that because Chiles was in business on his own account and had entered into the relevant contracts as part of that business, there was no employment relationship between him and the TV companies. In reaching its decision, the tribunal took into account Chiles’ freelance work history, in particular that he used a management company to which he paid a 15 percent commission, and a personal assistant to promote his reputation and generally manage his career, which was indicative of sound business management. He also provided his services to 25 additional clients, generating over £350,000, and used his own tools (in particular, a home office) to provide his services to the TV companies, and was not integrated into their businesses (although he was an integral part of the programmes he presented). It should be said that HMRC may yet seek to appeal the decision to the Upper Tier Tax tribunal. Conduct can affect compensation A recent Employment Appeal Tribunal (EAT) decision provides a useful demonstration of the circumstances under which the conduct of either employer or employee can reduce the amount of compensation awarded in an unfair dismissal claim. In this case, Wilkinson v Driver and Vehicle Standards Agency, Mr Wilkinson was a driving examiner who had knowingly breached his employer's policy by driving a candidate's car back to the test centre after an aborted test. He then failed to disclose his actions to his line manager and also deliberately completed paperwork, giving vague information, in order to hide what he had done. When his line manager found out about the breach by chance some weeks later, a disciplinary procedure was instigated. Wilkinson remained in his post with no restrictions during the procedure, although his line manager emailed the investigating officer saying his trust in Wilkinson was broken and ‘‘hard to repair.’’ Wilkinson was subsequently dismissed for gross misconduct and for a breakdown in trust and confidence. But was Wilkinson’s dismissal unfair? He thought so and claimed as such. The Tribunal found that the procedure followed by the employer had been flawed, so that the dismissal was indeed unfair. Turning to the question of what level of compensation it was appropriate to award, the Tribunal reduced the amount of both the basic and the compensatory award to zero “because of Mr Wilkinson's conduct”. Wilkinson appealed to the EAT. In looking at the impact of contributory conduct, the EAT allowed the appeal. It held that an unfair dismissal compensatory award can be reduced for contributory conduct by the employee even if, had the employer acted fairly, the dismissal would not have occurred. However, the EAT also found the impact of the employer's contributory conduct should also have been taken into account by the Tribunal in determining the appropriate value of the award. The EAT remitted the case back to the Tribunal for it to reconsider the appropriate amounts of the basic and compensatory awards. Gareth Edwards is a partner in the employment team at VWV. He then failed to disclose his actions to his line manager and also deliberately completed paperwork, giving vague information, in order to hide what he had done. Brave | Curious | Resilient / www.cicm.com / May 2022 / PAGE 73
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CREDIT MANAGEMENT CM MAY 2022 £12.
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Credit Management May 2022

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