We have commented in previous Newsletters about this case.  In brief, it has changed the way in which negotiated settlements in employment status cases have been viewed by HMRC.  Where previously an “employer” was able to offset tax and NIC paid by a self employed individual against PAYE and NIC duties levied as a result of recategorisation, the Demibourne case set a precedent where this offset is no longer available.  Income tax and NIC will be due on the full amount of money paid to the individual, who would in turn receive a refund of income tax and NIC paid via Self Assessment.

In a statement made by HMRC to the Chartered Institute of Taxation on 12 September, the Demibourne Working Party has advised HMRC that they will be instructing Tax Counsel to seek an opinion on:

a)      an interim solution to address outstanding and any new settlements in employment status cases prior to any possible change in primary legislation, and

b)      a longer term solution for the future, possibly based on legislative change.

The statement states that HMRC are conscious of the need to progress matters in relation to Demibourne as speedily as possible.  The proposed meeting with Tax Counsel has taken place and HMRC are intending to meet with the Working Party early next month.  It is hoped that the outcome of these meetings is to form a practical basis for resolving open cases and dealing with matters satisfactorily in the future.

This page was last updated on Friday, January 04, 2008.