What's the difference between a car valet and the deputy chief executive ?

Not very much in tax terms but probably more than £950 a day in money terms.

Mr Mustard's accountants Moore Stephens, who help him to keep his records absolutely straight, and as a former Tax Officer Higher Grade in the Inland Revenue he wouldn't have it any other way, have just sent him details of a recent court case. It concerns the tax treatment of car valeters and they were found by the Supreme court to be employees regardless of what their Contracts of employment said. You can read the story here on the Moore Stephens website ( they are very good accountants ) and for your convenience Mr Mustard has reprinted the text below.

Sub-contractor or employee?

Published 17 August 2011

A recent Supreme Court decision has highlighted the need for employers to check that the sub-contractors they use really are sub-contractors, not employees – and this judgment must be based on the reality of the situation, rather than purely the contractual terms. Otherwise, businesses wrongly treating individuals as sub-contractors could incur unwelcome tax liabilities.

The case involved Autoclenz, a provider of car-cleaning services to motor retailers and auctioneers. Car valeters working for the company signed contracts which contained statements to the effect that they were self-employed and they were taxed on this basis. However, the car valeters subsequently claimed that they were ‘workers’ within the meaning of the National Minimum Wage Regulations 1999 (NMWR) and the Working Time Regulations 1998, and that consequently they were entitled to holiday pay and to be paid in accordance with the NMWR.

The contracts included clauses that were inconsistent with a contract of employment. For example, one clause allowed a sub-contractor to engage one or more individuals to carry out the valeting on their behalf (a ‘substitution’ clause) and another provided that the sub-contractor was not obliged to provide services (a ‘no obligations’ clause).

Nevertheless, the Supreme Court upheld the findings of the Employment Tribunal that the car valeters were in fact employees of Autoclenz; it ruled that the contractual terms could be disregarded as they did not reflect the true agreement between the parties – the reality of the situation in practice.

Although the Autoclenz case focuses on pay rates and rights, it has implications for the tax liabilities of businesses as well. Commenting on the decision, Tax Partner Jacquelyn Kimber, explains: “It can be advantageous for a business if an individual is self-employed rather than an employee, particularly in relation to the National Insurance position. However, this Supreme Court case reinforces the point that it is the facts of what actually happens and not just the documentation which determine employment status. Before classifying anybody as self-employed, it is essential to ensure that the facts support the reality. Otherwise, the business could be building up unwelcome future tax liabilities.”

Now if we look inside North London Business Park are there any employees masquerading as self employed contractors? Several, and Mr Mustard knows that the decision making process has been left to managers who know a lot less than an accountant or the Supreme Court about tax.

How can the deputy chief executive Andrew Travers not be an employee? and as a CIPFA qualified accountant he really should know better and set an example.

The interim head of Human Resources, Jacquie McGeachie seems to be allergic to PAYE, and as head of HR ( a position which will hopefully soon be filled by a permanent employee on PAYE ) she too should be setting an example.

Martin Willoughby organises one move after another at NLBP and doesn't appear to have another client. He doesn't supply men, vehicles or materials, just himself. He should be an employee, at least until there is no-one left to move around and then he could be moved himself: home!

Jason Wheatley, the Interim Resourcing, Performance & Talent Manager  

Chris Malyon, the Assistant Director Commercial Assurance 

Christopher Palmer, the Interim Assistant Director - Communications

are all current or former employees who haven't been treated as employees for tax purposes and really should have been. If senior people in an organisation don't show the highest levels of probity what behaviour can one expect from those at the bottom of the organisation?

How long before HM Customs & Revenue get round to doing an audit and impose a huge fine on Barnet Council which means that more money has to be taken from your pocket dear readers and Mr Mustard's.

Yours frugally

Mr Mustard