(Sourced from PCG http://www.pcg.org.uk)

Tribunal cites lack of ‘mutuality of obligation’ as key to ruling in favour of taxpayer.

The first tier tax tribunal has awarded in favour of freelance engineering contractor and PCG member Mark Fitzpatrick against Her Majesty’s Revenue and Customs (HMRC) over controversial tax status law IR35.

Mr Fitzpatrick was officially cleared of using his limited company MBF Design Services to avoid tax, in reference to his time working as a freelance contractor for Airbus.

The tribunal reported a knock-out case victory across all three IR35 pillars noting a lack of ‘Mutuality of Obligation,’ (MOO) as a significant factor in their decision. Key MOO points in favour of MBF included:

· Airbus could cancel MBF’s contract without notice.

· Specifically there had been occasions where due to computer failure contractors were sent home without pay whereas employees had to remain on-site.

Mr Fitzpatrick, represented in court by Accountax, relied on support via tax investigation insurance from PCG, the leading trade association representing the freelance industry to make his defence – this funded his seven year legal battle.

The standard rate for VAT increased on 04 January 2011 from 17.5% to 20%. Please make sure your standing order payment to us is adjusted for the increase in VAT.

For all our active clients, your next monthly accounting fee is due on 01 February 2011. Please adjust your standing order payment to us now, to ensure you pay us the correct amount on 01 Feb 2011 (and if you still do not have a standing order payment to us set-up, now is the perfect time to do it).

You can find all the payment information you need on your My Accounting Fee page within your No Worries online account. If you have any questions at all regarding this please feel free to get in touch – that’s what we’re here for.

As many of you already know the standard rate for VAT increased on 04 January 2011 from 17.5% to 20%.

Invoicing your clients (for our VAT registered clients only)

Any work done for your clients on or after 04 January 2011 will need to be invoiced at the new VAT rate of 20%. Please check your Toolbox page for our guidance regarding this (see the document New VAT Rate for 2011).

When you attempt to raise an invoice after this period using the old VAT rate of 17.5%, a warning message will be displayed. To update the VAT rate for your invoice, simply edit the client information from your My Contracts page. Once done, the new VAT rate will be used automatically for all future invoices.