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HMRC have published a note setting out their view on the record-keeping requirements, completion of self assessment tax returns and interpretation of ‘merely incidental’ duties with regard to dual contracts.
The note does not invalidate the article in Tax Bulletin 76, published in 2005 (see also Employment Income Manual EIM77030 Appendix 3: Non domiciled employees: dual contract arrangements) in which HMRC explained their policy in relation to dual contracts.
Questions have arisen concerning dual contract arrangements as to the documents HMRC expect employers and employees to retain and make available in response to enquiries into dual contracts, and also about HMRC’s technical and policy interpretation of ‘merely incidental’ duties.
With regard to documents, HMRC say it is reasonable to require access to the following documents, for some or all of the period under review: diaries, emails, expenses claims and supporting receipts, telephone records and client files. These might be held on a computer, magnetic tape, optical disk, hard disk, memory stick, flash drive, floppy disk or other recording media.
Where the employee possesses such records, HMRC would expect the individual to comply with TMA 1970, s 12B and retain any documents or information that would have enabled him to deliver a complete and correct return, until the later of either the closure of the enquiry window or, if applicable, the date an enquiry into the return is closed.
HMRC will consider approaching the employer for the records should it be beyond the power of the employee to obtain them.
‘In a spirit of collaborative engagement’ HMRC ask all employers that use dual contract arrangements to implement a retention policy that will retain relevant documents for at least two years from the end of the tax year to which the document relates.
The department says it will use the powers in FA 2008, Sch 36 to require production of documents, as well as the exchange of information powers with relevant overseas authorities.
With regard to the definition of ‘incidental duties’, HMRC state in their note that they do ‘not believe there is good reason to revise [their] interpretation of “merely incidental” duties set out in the tax bulletin in 2005’.
