56 Application of Income Tax Acts in relation to deemed employment
(1) The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows.
(2) They apply as if—
(a) the worker were employed by the intermediary, and
(b) the relevant engagements were undertaken by the worker in the course of performing the duties of that employment.
(3) The deemed employment payment is treated in particular—
(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed employment payment; and
(b) as taxable earnings from the employment for the purposes of section 232.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Where the intermediary is a partnership or unincorporated association, the deemed employment payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.
(7) Where—
(a) the worker is resident in the United Kingdom, and
(b) the services in question are provided in the United Kingdom, ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the intermediary is treated as having a place of business in the United Kingdom, whether or not it in fact does so.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57 Earlier date of deemed employment payment in certain cases
(1) If in any tax year—
(a) a deemed employment payment is treated as made, and
(b) before the date on which the payment would be treated as made under section 50(2) any relevant event (as defined below) occurs in relation to the intermediary,
the deemed employment payment for that year is treated as having been made immediately before that event or, if there is more than one, immediately before the first of them.
(2) Where the intermediary is a company the following are relevant events—
(a) the company ceasing to trade;
(b) where the worker is a member of the company, the worker ceasing to be such a member;
(c) where the worker holds an office with the company, the worker ceasing to hold such an office;
(d) where the worker is employed by the company, the worker ceasing to be so employed.
(3) Where the intermediary is a partnership the following are relevant events—
(a) the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such;
(b) where the worker is employed by the partnership, the worker ceasing to be so employed.
(4) Where the intermediary is an individual and the worker is employed by the intermediary, it is a relevant event if the worker ceases to be so employed.
(5) The fact that the deemed employment payment is treated as made before the end of the tax year does not affect what receipts and other matters are taken into account in calculating its amount.
58 Relief in case of distributions by intermediary
(1) A claim for relief may be made under this section where the intermediary—
(a) is a company,
(b) is treated as making a deemed employment payment in any tax year, and
(c) either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”).
(2) A claim for relief under this section must be made—
(a) by the intermediary by notice to an officer of Revenue and Customs , and
(b) within 5 years after the 31st January following the tax year in which the distribution is made.
(3) If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate.
(4) Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution.
(5) In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment—
(a) against relevant distributions of the same tax year before those of other years,
(b) against relevant distributions received by the worker before those received by another person, and
(c) against relevant distributions of earlier years before those of later years.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59 Provisions applicable to multiple intermediaries
(1) The provisions of this section apply where in the case of an engagement to which this Chapter applies the arrangements involve more than one relevant intermediary.
(2) All relevant intermediaries in relation to the engagement are jointly and severally liable, subject to subsection (3), to account for any amount required under the PAYE provisions to be deducted from a deemed employment payment treated as made by any of them—
(a) in respect of that engagement, or
(b) in respect of that engagement together with other engagements.
(3) An intermediary is not so liable if it has not received any payment or benefit in respect of that engagement or any such other engagement as is mentioned in subsection (2)(b).
(4) Subsection (5) applies where a payment or benefit has been made or provided, directly or indirectly, from one relevant intermediary to another in respect of the engagement.
(5) In that case, the amount taken into account in relation to any intermediary in step 1 or step 2 of section 54(1) is reduced to such extent as is necessary to avoid double-counting having regard to the amount so taken into account in relation to any other intermediary.
(6) Except as provided by subsections (2) to (5), the provisions of this Chapter apply separately in relation to each relevant intermediary.
(7) In this section “relevant intermediary” means an intermediary in relation to which the conditions specified in section 51, 52 or 53 are met.
(1) In this Chapter “associate”—
(a) in relation to an individual, has the meaning given by section 448 of CTA 2010, subject to the following provisions of this section;
(b) in relation to a company, means a person connected with the company; and
(c) in relation to a partnership, means any associate of a member of the partnership.
(2) Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of the individual by reason only of that interest except in the following circumstances.
(3) The exception is where—
(a) the individual, either alone or with any one or more associates of the individual, or
(b) any associate of the individual, with or without other such associates,
has at any time on or after 14th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control more than 5% of the ordinary share capital of the company.
(4) In subsection (3) “associate” does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.
(5) Sections 549 to 554 (attribution of interests in companies to beneficiaries of employee benefit trusts) apply for the purposes of subsection (3) as they apply for the purposes of the provisions listed in section 549(2).
(6) In this section “employee benefit trust” has the meaning given by sections 550 and 551.
60A When a company qualifies as small for a tax year
(1) For the purposes of this Chapter, a company qualifies as small for a tax year if one of the following conditions is met (but this is subject to section 60C).
(2) The first condition is that the company's first financial year is not relevant to the tax year.
(3) The second condition is that the small companies regime applies to the company for its last financial year that is relevant to the tax year.
(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60B When a company qualifies as small for a tax year: joint ventures
(1) This section applies when determining for the purposes of section 60A(3) whether the small companies regime applies to a company for a financial year in a case where—
(a) at the end of the financial year the company is jointly controlled by two or more other persons, and
(b) one or more of those other persons are undertakings (“the joint venturer undertakings”).
(2) If the company is a parent company, the joint venturer undertakings are to be treated as members of the group headed by the company.
(3) If the company is not a parent company, the company and the joint venturer undertakings are to be treated as constituting a group of which the company is the parent company.
(4) In this section the expression “jointly controlled” is to be read in accordance with those provisions of international accounting standards which relate to joint ventures.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60C When a company qualifies as small for a tax year: subsidiaries
(1) A company does not qualify as small for a tax year by reason of the condition in section 60A(3) being met if—
(a) the company is a member of a group at the end of its last financial year that is relevant to the tax year,
(b) the company is not the parent undertaking of that group at the end of that financial year, and
(c) the undertaking that is the parent undertaking of that group at that time does not qualify as small in relation to its last financial year that is relevant to the tax year.
(2) Where the parent undertaking mentioned in subsection (1)(c) is not a company, sections 382 and 383 of the Companies Act 2006 have effect for determining whether the parent undertaking qualifies as small in relation to its last financial year that is relevant to the tax year as if references in those sections to a company and a parent company included references to an undertaking and a parent undertaking.
(3) For the purposes of subsections (1)(c) and (2) a financial year of an undertaking that is not a company is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.
(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60D When a relevant undertaking qualifies as small for a tax year
(1) Sections 60A to 60C apply in relation to a relevant undertaking as they apply in relation to a company, subject to any necessary modifications.
(2) In this section “relevant undertaking” means an undertaking in respect of which regulations have effect under—
(a) section 15(a) of the Limited Liability Partnerships Act 2000,
(b) section 1043 of the Companies Act 2006 (unregistered companies), or
(c) section 1049 of the Companies Act 2006 (overseas companies).
(3) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60E When other undertakings qualify as small for a tax year
(1) An undertaking that is not a company or a relevant undertaking qualifies as small for a tax year if one of the following conditions is met.
(2) The first condition is that the undertaking's first financial year is not relevant to the tax year.
(3) The second condition is that the undertaking's turnover for its last financial year that is relevant to the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.
(4) For the purposes of this section a financial year of an undertaking is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.
(5) In this section—
“relevant undertaking” has the meaning given by section 60D, and
“turnover”, in relation to an undertaking, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.
(6) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60F When other persons qualify as small for a tax year
(1) For the purposes of this Chapter, a person who is not a company, relevant undertaking or other undertaking qualifies as small for a tax year if the person's turnover for the last calendar year before the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.
(2) In this section—
“company” and “undertaking” have the same meaning as in the Companies Act 2006,
“relevant undertaking” has the meaning given by section 60D, and
“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.
(1) This section applies where—
(a) it is necessary for the purposes of determining whether a person qualifies as small for a tax year (“the tax year concerned”) to first determine the person's turnover for a financial year or calendar year (“the assessment year”), and
(b) at the end of the assessment year the person is connected with one or more other persons (“the connected persons”).
(2) For the purposes of determining whether the person qualifies as small for the tax year concerned the person's turnover for the assessment year is to be taken to be the sum of—
(a) the person's turnover for the assessment year, and
(b) the relevant turnover of each of the connected persons.
(3) In subsection (2)(b) “the relevant turnover” of a connected person means—
(a) in a case where the connected person is a company, relevant undertaking or other undertaking, its turnover for its last financial year that is relevant to the tax year concerned, and
(b) in a case where the connected person is not a company, relevant undertaking or other undertaking, the turnover of the connected person for the last calendar year ending before the tax year concerned.
(4) For the purposes of subsection (3)(a)—
(a) a financial year of a company or relevant undertaking is relevant to the tax year concerned if the period for filing accounts and reports for the financial year ends before the beginning of the tax year concerned, and
(b) a financial year of any other undertaking is relevant to the tax year concerned if it ends more than 9 months before the beginning of the tax year concerned.
(5) In a case where—
(a) the person mentioned in subsection (1)(a) is a company or relevant undertaking, and
(b) at the end of the assessment period the person is a member of a group,
the person is to be treated for the purposes of this section as not being connected with any person that is a member of that group.
(6) In this section—
“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived, and
“relevant undertaking” has the meaning given by section 60D.
(7) For provision determining whether one person is connected with another, see section 718 (connected persons).
(8) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60H Duty on client to state whether it qualifies as small for a tax year
(1) This section applies if, in the case of an engagement that meets conditions (a) to (b) in section 49(1), the client receives from the client's agent or the worker a request to state whether in the client's opinion the client qualifies as small for a tax year specified in the request.
(2) The client must provide to the person who made the request a statement as to whether in the client's opinion the client qualifies as small for the tax year specified in the request.
(3) If the client fails to provide the statement by the time mentioned in subsection (4) the duty to do so is enforceable by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
(4) The time is whichever is the later of—
(a) the end of the period of 45 days beginning with the date the client receives the request, and
(b) the beginning of the period of 45 days ending with the start of the tax year specified in the request.
(5) In this section “the client's agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in paragraph (b) of section 49(1).
60I When a person has a UK connection for a tax year
(1) For the purposes of this Chapter, a person has a UK connection for a tax year if (and only if) immediately before the beginning of that tax year the person—
(a) is resident in the United Kingdom, or
(b) has a permanent establishment in the United Kingdom.
(2) In this section “permanent establishment”—
(a) in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and
(b) in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.
(1) In this Chapter—
“associate” has the meaning given by section 60;
“associated company” has the meaning given by section 449 of CTA 2010;
“business” means any trade, profession or vocation and includes a UK property business within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009;
“company” (except in sections 60A to 60G) means a body corporate or unincorporated association, and does not include a partnership;
“employer’s national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions;
“engagement to which Chapter 10 applies” has the meaning given by section 61M(5);
“engagement to which this Chapter applies” has the meaning given by section 49(5);
“national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992;
“PAYE provisions” means the provisions of Part 11 or PAYE regulations;
“the relevant engagements” has the meaning given by section 50(4).
(2) References in this Chapter to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in the person’s capacity as a member of the partnership or association.
(3) For the purposes of this Chapter—
(a) anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and
(b) a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.
(4) For the purposes of this Chapter, two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other.
(1) This Chapter has effect with respect to the provision of services by a managed service company.
(2) Nothing in this Chapter—
(a) affects the operation of Chapter 7 of this Part (agency workers), or
(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).
(3) See also section 61D(4A) (disapplication of this Chapter if Chapter 10 applies).
(1) A company is a “managed service company” if—
(a) its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons,
(b) payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services,
(c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and
(d) a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals (“an MSC provider”) is involved with the company.
(2) An MSC provider is “involved with the company” if the MSC provider or an associate of the MSC provider—
(a) benefits financially on an ongoing basis from the provision of the services of the individual,
(b) influences or controls the provision of those services,
(c) influences or controls the way in which payments to the individual (or associates of the individual) are made,
(d) influences or controls the company's finances or any of its activities, or
(e) gives or promotes an undertaking to make good any tax loss.
(3) A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity.
(4) A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services).
(5) Subsection (4) does not apply if the person or an associate of the person—
(a) does anything within subsection (2)(c) or (e), or
(b) does anything within subsection (2)(d) other than influencing the company's finances or activities by doing anything within subsection (2)(b).
(1) The Treasury may by order provide that persons of a prescribed description do not fall within section 61B(1)(d).
(2) An order under subsection (1) may be made so as to have effect in relation to the whole of the tax year in which it is made.
(3) In section 61B and this section, “company” means a body corporate or partnership.
(4) References in section 61B to an associate of a person (“P”) include a person who, for the purpose of securing that the individual's services are provided by a company, acts in concert with P (or with P and other persons).
(5) In section 61B(2)(e), “undertaking to make good any tax loss” means an undertaking (in any terms) to make good (in whole or in part, and by any means) any cost to the individual or an associate of the individual resulting from a relevant provision, or a particular kind of relevant provision, applying in relation to payments made to the individual or associate.
(6) In subsection (5) “relevant provision” means—
(a) a provision of the Tax Acts,
(b) an enactment relating to national insurance, or
(c) a provision of subordinate legislation made under any such provision or enactment.
61D Worker treated as receiving earnings from employment
(1) This section applies if—
(a) the services of an individual (“the worker”) are provided (directly or indirectly) by a managed service company (“the MSC”),
(b) the worker, or an associate of the worker, receives (from any person) a payment or benefit which can reasonably be taken to be in respect of the services, and
(c) the payment or benefit is not earnings (within Chapter 1 of Part 3) received by the worker directly from the MSC.
(2) The MSC is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed employment payment”).
(3) The deemed employment payment is treated as made at the time the payment or benefit mentioned in subsection (1)(b) is received.
(4) In this Chapter—
“the worker” has the meaning given by subsection (1),
“the relevant services” means the services mentioned in that subsection, and
“the client” means the person to whom the relevant services are provided.
(4A) This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies and either—
(a) the client for the purposes of section 61M(1) is a public authority, or
(b) the client for the purposes of section 61M(1)—
(i) qualifies as medium or large for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received, and
(ii) has a UK connection for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received.
(4B) Sections 60I (when a person has a UK connection for a tax year), 61K(3) (when a person qualifies as medium or large for a tax year) and 61L (meaning of public authority) apply for the purposes of subsection (4A).
(4C) It does not matter for the purposes of subsection (4A) whether the client for the purposes of this Chapter is also “the client” for the purposes of section 61M(1).
(5) Section 61F supplements this section.
(1) The amount of the deemed employment payment is the amount resulting from the following steps—
Step 1
Find (applying section 61F) the amount of the payment or benefit mentioned in section 61D(1)(b).
Step 2
Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met by the worker that would have been deductible from the taxable earnings from the employment if—
(a) the worker had been employed by the client to provide the relevant services, and
(b) the expenses had been met by the worker out of those earnings.
If the result at this point is nil or a negative amount, there is no deemed employment payment.
Step 3
Assume that the result of step 2 represents an amount together with employer's national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions.
The result is the deemed employment payment.
(2) In step 2 of subsection (1), the reference to expenses met by the worker includes, where the MSC is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.
(3) In step 2 of subsection (1), the expenses deductible include the amount of any mileage allowance relief which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (4) if—
(a) the worker had been employed by the client to provide the relevant services, and
(b) the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4).
(4) A vehicle falls within this subsection if—
(a) it is provided by the MSC for the worker, or
(b) where the MSC is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership.
(5) For the purposes of subsection (1) any necessary apportionment of payments or benefits that are referable partly to the provision of the relevant services and partly to other matters is to be made on a just and reasonable basis.
61F Sections 61D and 61E: application of rules relating to earnings from employment
(1) The following provisions apply for the purposes of sections 61D and 61E.
(2) A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be general earnings from the employment.
(3) The amount of a payment or benefit is taken to be—
(a) in the case of a payment or cash benefit, the amount received, and
(b) in the case of a non-cash benefit, the cash equivalent of the benefit.
(4) The cash equivalent of a non-cash benefit is taken to be—
(a) the amount that would be general earnings if the benefit were general earnings from an employment, or
(b) in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2).
(5) A payment or benefit is treated as received—
(a) in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit;
(b) in the case of a non-cash benefit, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if—
(i) the worker had been an employee, and
(ii) the benefit had been provided by reason of the employment.
61G Application of Income Tax Acts in relation to deemed employment
(1) The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows.
(2) They apply as if—
(a) the worker were employed by the MSC to provide the relevant services, and
(b) the deemed employment payment were a payment by the MSC of earnings from that employment;
but this is subject to subsection (3).
(3) No deduction under Part 5 (deductions allowed from employment income) or section 232 (mileage allowance relief) may be made from the deemed employment payment.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Where the MSC is a partnership and the worker is a member of the partnership, the deemed employment payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership.
(7) Where—
(a) the worker is resident in the United Kingdom, and
(b) the relevant services are provided in the United Kingdom,
the MSC is treated as having a place of business in the United Kingdom, whether or not it in fact does so.
61H Relief in case of distributions by managed service company
(1) A claim for relief may be made under this section where the MSC—
(a) is a body corporate,
(b) is treated as making a deemed employment payment in any tax year, and
(c) either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”).
(2) A claim for relief under this section must be made—
(a) by the MSC by notice to an officer of Revenue and Customs, and
(b) within 5 years after 31st January following the tax year in which the distribution is made.
(3) If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate.
(4) Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution.
(5) In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment—
(a) against relevant distributions of the same tax year before those of other years,
(b) against relevant distributions received by the worker before those received by another person, and
(c) against relevant distributions of earlier years before those of later years.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Subsections (2) to (4) apply for the purposes of this Chapter.
(2) “Associate”, in relation to an individual, means—
(a) a member of the individual's family or household,
(b) a relative of the individual,
(c) a partner of the individual, or
(d) the trustee of any settlement in relation to which the individual, or a relative of the individual or member of the individual's family (living or dead), is or was a settlor.
(3) “Associate”, in relation to a company, means a person connected with the company.
(4) “Associate”, in relation to a partnership, means any associate of a member of the partnership.
(5) If—
(a) a managed service company (“the MSC”) is a partnership, and
(b) a person is an associate of another person by virtue only of being a member of the partnership,
the person is to be treated, for the purposes of this Chapter as it applies in relation to the MSC, as if the person were not an associate of that other person.
(6) In subsection (2), “relative” means ancestor, lineal descendant, brother or sister.
(7) For the purposes of subsection (2), two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other.
(1) In this Chapter—
“associate” has the meaning given by section 61I,
“business” means any trade, profession or vocation,
“the client” has the meaning given by section 61D(4),
“employer's national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions,
“ engagement to which Chapter 10 applies” has the meaning given by section 61M(5),
“managed service company” has the meaning given by section 61B,
“national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992,
“PAYE provisions” means the provisions of Part 11 or PAYE regulations,
“the relevant services” has the meaning given by section 61D(4), and
“the worker” has the meaning given by section 61D(4).
(2) Nothing in section 995 of ITA 2007 (meaning of control) applies for the purposes of this Chapter.
(1) This Chapter has effect with respect to the provision of services through an intermediary in a case where the services are provided to a person who—
(a) is a public authority, or
(b) qualifies as medium or large and has a UK connection for a tax year
(2) Nothing in this Chapter—
(a) affects the operation of Chapter 7 of this Part (agency workers), or
(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).
(3) For the purposes of this Chapter a person qualifies as medium or large for a tax year if the person does not qualify as small for the tax year for the purposes of Chapter 8 of this Part (see sections 60A to 60G).
(4) Section 60I (when a person has a UK connection for a tax year) applies for the purposes of this Chapter.
(1) In this Chapter “public authority” means—
(a) a public authority as defined by the Freedom of Information Act 2000,
(aa) a body specified in section 23(3) of the Freedom of Information Act 2000,
(b) a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13),
(ba) the Advanced Research and Invention Agency,
(c) the Corporate Officer of the House of Commons,
(d) the Corporate Officer of the House of Lords,
(e) the National Assembly for Wales Commission, ...
(f) the Northern Ireland Assembly Commission , or
(g) a company connected with any person mentioned in paragraphs (a) to (f).
(2) An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority.
(3) Subsection (1) is subject to subsection (4).
(4) A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider—
(a) has a registered patient list for the purposes of relevant medical-services regulations,
(b) is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services,
(c) is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or
(d) is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services.
(5) In this section—
“primary-healthcare provider” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph,
“relevant paragraph” means—
any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and
“relevant medical-services regulations” means any of the following—
the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 (S.I. 2004/906),
the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 (S.I. 2004/1017),
the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 (S.S.I. 2004/162), and
the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477).
(6) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend this section in consequence of—
(a) any amendment or revocation of any regulations for the time being referred to in this section,
(b) any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
(c) any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002.
(1) Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), ...
(ca) the client—
(i) is a public authority, or
(ii) is a person who qualifies as medium or large and has a UK connection for one or more tax years during which the arrangements mentioned in paragraph (c) have effect, and
(d) the circumstances are such that—
(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or
(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.
(1A) But sections 61N to 61R do not apply if—
(a) the client is an individual, and
(b) the services are provided otherwise than for the purposes of the client's trade or business.
(2) The reference in subsection (1)(c) to a “third party” includes a partnership or unincorporated association of which the worker is a member.
(3) The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.
(4) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).
(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).
61N Worker treated as receiving earnings from employment
(1) If one of Conditions A to C is met, identify the chain of two or more persons where—
(a) the highest person in the chain is the client,
(b) the lowest person in the chain is the intermediary, and
(c) each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain.
(See section 61U for cases where one of Conditions A to C is treated as being met.)
(2) In this section and sections 61O to 61S—
“chain payment” means a payment, or money's worth or any other benefit, that can reasonably be taken to be for the worker's services to the client,
“make”—
in relation to a chain payment that is money's worth, means transfer, and
in relation to a chain payment that is a benefit other than a payment or money's worth, means provide, and
“the fee-payer” means the person in the chain immediately above the lowest.
(3) The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and (8A) and sections 61T , 61TA , 61V and 61WA.
(4) The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer.
(5) Unless and until the client gives a status determination statement to the worker (see section 61NA), subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to sections 61V and 61WA.
(5A) Subsections (6) and (7) apply, subject to sections 61T, 61TA , 61V and 61WA, if—
(a) the client has given a status determination statement to the worker,
(b) the client is not the fee-payer, and
(c) the fee-payer is not a qualifying person.
(6) If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.
(7) Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who—
(a) is above the lowest,
(b) is a qualifying person, and
(c) is lower in the chain than any other person in the chain who—
(i) is above the lowest, and
(ii) is a qualifying person.
(8) In subsections (5) to (7) a “qualifying person” is a person who—
(za) has been given by the person immediately above them in the chain the status determination statement given by the client to the worker,
(a) is resident in the United Kingdom or has a place of business in the United Kingdom,
(b) is not a person who is controlled by—
(i) the worker, alone or with one or more associates of the worker, or
(ii) an associate of the worker, with or without other associates of the worker, and
(c) if a company, is not one in which—
(i) the worker, alone or with one or more associates of the worker, or
(ii) an associate of the worker, with or without other associates of the worker,
has a material interest (within the meaning given by section 51(4) and (5)).
(8A) If the client is not a public authority, a person is to be treated by subsection (3) as making a deemed direct payment to the worker only if the chain payment made by the person is made in a tax year for which the client qualifies as medium or large and has a UK connection.
(9) Condition A is that—
(a) the intermediary is a company, and
(b) the conditions in section 61O are met in relation to the intermediary.
(10) Condition B is that—
(a) the intermediary is a partnership,
(b) the worker is a member of the partnership,
(c) the provision of the services is by the worker as a member of the partnership, and
(d) the condition in section 61P is met in relation to the intermediary.
(11) Condition C is that the intermediary is an individual.
(12) Where a payment, money's worth or any other benefit can reasonably be taken to be for both—
(a) the worker's services to the client, and
(b) anything else,
then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker's services is to be treated as (and the rest is to be treated as not being) a payment, or money's worth or another benefit, that can reasonably be taken to be for the worker's services.
(1) For the purposes of section 61N “status determination statement” means a statement by the client that—
(a) states that the client has concluded that the condition in section 61M(1)(d) is met in the case of the engagement and explains the reasons for that conclusion, or
(b) states (albeit incorrectly) that the client has concluded that the condition in section 61M(1)(d) is not met in the case of the engagement and explains the reasons for that conclusion.
(2) But a statement is not a status determination statement if the client fails to take reasonable care in coming to the conclusion mentioned in it.
(3) For further provisions concerning status determination statements, see section 61T (client-led status disagreement process) and section 61TA (duty for client to withdraw status determination statement if it ceases to be medium or large).
(1) The conditions mentioned in section 61N(9)(b) are that—
(a) the intermediary is not an associated company of the client that falls within subsection (2), and
(b) subsection (1A) or (1B) is satisfied.
(1A) This subsection is satisfied where the worker has a material interest in the intermediary.
(1B) This subsection is satisfied where—
(a) the worker has a non-material interest in the intermediary,
(b) the worker—
(i) has received,
(ii) has rights which entitle, or which in any circumstances would entitle, the worker to receive, or
(iii) expects to receive,
a chain payment from the intermediary, and
(c) the chain payment does not, or will not, wholly constitute employment income of the worker (apart from as a result of this Chapter).
(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—
(a) of the worker, or
(b) of the worker and other persons.
(3) The worker is treated as having a material interest in the intermediary if—
(a) the worker, alone or with one or more associates of the worker, or
(b) an associate of the worker, with or without other associates of the worker,
has a material interest in the intermediary.
(4) For this purpose “material interest” has the meaning given by section 51(4) and (5).
(4A) The worker is treated as having a non-material interest in the intermediary if—
(a) the worker, alone or with one or more associates of the worker, or
(b) an associate of the worker, with or without other associates of the worker,
has a non-material interest in the intermediary.
(4B) For this purpose a non-material interest means—
(a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, 5% or less of the ordinary share capital of the company,
(b) possession of, or entitlement to acquire, rights entitling the holder to receive 5% or less of any distributions that may be made by the company, or
(c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive 5% or less of the assets that would then be available for distribution among the participators.
(4C) In subsection (4B)(c) “participator” has the meaning given by section 454 of CTA 2010.
(5) In this section “associated company” has the meaning given by section 449 of CTA 2010.
61P Conditions where intermediary is a partnership
(1) The condition mentioned in section 61N(10)(d) is—
(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or
(b) that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies—
(i) to a single client, or
(ii) to a single client together with associates of that client, or
(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies.
(2) In subsection (1)(a) “relative” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister.
(3) Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8.
(1) The amount of the deemed direct payment is the amount resulting from the following steps—
Step 1 Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax.
Step 2 Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services.
Step 3 Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if—
the worker had been employed by the client, and
the expenses had been met by the worker out of those earnings.
Step 4 If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment.
(2) For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.
(3) In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S.
(4) If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment.
(5) In Step 3 of subsection (1), the reference to expenses met by the intermediary includes—
(a) expenses met by the worker and reimbursed by the intermediary, and
(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.
(6) In subsection (4) “contributions regulations” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “primary Class 1 contribution” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act.
61R Application of Income Tax Acts in relation to deemed employment
(1) The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows.
(2) They apply as if—
(a) the worker were employed by the person treated as making the deemed direct payment, and
(b) the services were performed, or to be performed, by the worker in the course of performing the duties of that employment.
(3) The deemed direct payment is treated in particular—
(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and
(b) as taxable earnings from the employment for the purposes of section 232.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership or association.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) in respect of the payment.
(But see subsection (4)).
(2) The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase.
(3) Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them.
(4) This section does not apply in a case to which 61V(2) applies (relevant person treated as making deemed direct payment).
(5) In subsection (2) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment.
(1) This section applies if, before the final chain payment is made in the case of an engagement to which this Chapter applies, the worker or the deemed employer makes representations to the client that the conclusion contained in a status determination statement is incorrect.
(2) The client must either—
(a) give a statement to the worker or (as the case may be) the deemed employer that—
(i) states that the client has considered the representations and has decided that the conclusion contained in the status determination statement is correct, and
(ii) states the reasons for that decision, or
(b) give a new status determination statement to the worker and the deemed employer that—
(i) contains a different conclusion from the conclusion contained in the previous status determination statement,
(ii) states the date from which the client considers that the conclusion contained in the new status determination statement became correct, and
(iii) states that the previous status determination statement is withdrawn.
(3) If the client fails to comply with the duty in subsection (2) before the end of the period of 45 days beginning with the date the client receives the representations, section 61N(3) and (4) has effect from the end of that period until the duty is complied with as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to sections 61V and 61WA.
(4) A new status determination statement given to the deemed employer under subsection (2)(b) is to be treated for the purposes of section 61N(8)(za) as having been given to the deemed employer by the person immediately above the deemed employer in the chain.
(5) In this section—
“the deemed employer” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment;
“status determination statement” has the meaning given by section 61NA.
61TA Duty for client to withdraw status determination statement if it ceases to be medium or large
(1) This section applies if in the case of an engagement to which this Chapter applies—
(a) the client is not a public authority,
(b) the client gives a status determination statement to the worker, the client's agent or both, and
(c) the client does not (but for this section) qualify as medium or large for a tax year beginning after the status determination statement is given.
(2) Before the beginning of the tax year the client must give a statement to the relevant person, or (as the case may be) to both of the relevant persons, stating—
(a) that the client does not qualify as medium or large for the tax year, and
(b) that the status determination statement is withdrawn with effect from the beginning of the tax year.
(3) If the client fails to comply with that duty the following rules apply in relation to the engagement for the tax year—
(a) the client is to be treated as medium or large for the tax year, and
(b) section 61N(3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.
(4) For the purposes of subsection (2)—
(a) the worker is a relevant person if the status determination statement was given to the worker, and
(b) the deemed employer is a relevant person if the status determination statement was given to the client's agent.
(5) In this section—
“client's agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in section 61M(1)(c);
“the deemed employer” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment;
“status determination statement” has the meaning given by section 61NA.
61U Information to be provided by worker or intermediary and consequences of failure
(1) In the case of an engagement to which this Chapter applies, the relevant person must inform the potential deemed employer of which one of the following is applicable—
(a) that one of conditions A to C in section 61N is met in the case;
(b) that none of conditions A to C in section 61N is met in the case.
(2) If the relevant person has not complied with subsection (1) then, for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met.
(3) In this section —
“relevant person” means the worker or, in a case where the worker has not complied with subsection (1), the intermediary;
“the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3).
61V Consequences of providing fraudulent information
(1) Subsection (2) applies if in any case—
(a) a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and
(b) the fraudulent documentation condition is met.
(2) Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the relevant person (or if more than one, the first relevant person) in relation to whom the fraudulent documentation condition is met, but—
(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and
(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.
(3) Subsection (2) has effect even though that may involve a services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3).
(4) “The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence—
(a) that the case is not an engagement to which this Chapter applies, or
(b) that none of conditions A to C in section 61N is met in the case.
(4A) But where the fraudulent documentation condition would (ignoring this subsection) be met as a result of the provision of a fraudulent document intended to constitute evidence that section 61Y (umbrella companies) applies in relation to the services provided by the worker, that condition is to be treated as not met.
(5) A “relevant person” is—
(a) the services-provider;
(b) a person connected with the services-provider;
(c) if the intermediary in the case is a company, an office-holder in that company;
(d) a person in the chain who is resident in the United Kingdom or has a place of business in the United Kingdom.
61W Prevention of double charge to tax and allowance of certain deductions
(1) Subsection (2) applies where—
(a) a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”),
(b) the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a another person (“the client”),
(c) a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee,
(d) the underlying chain payment can reasonably be taken to be for the same services of the payee to the client, and
(e) the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment.
(2) For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following—
(a) the amount (see section 61Q) of the deemed payment;
(b) the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the client and had incurred the expenditure;
(c) the amount of any contributions made, in the same tax year as the end-of-line remuneration, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.
(3) Subsection (2)(c)does not apply to—
(a) excess contributions paid and later repaid,
(b) contributions set under subsection (2) against another payment by the paying intermediary, or
(c) contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee.
(4) For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation.
(5) In subsection (1)(d) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment.
(6) Subsection (2) applies whether the end-of-line remuneration—
(a) is earnings of the payee,
(b) is a distribution of the paying intermediary, or
(c) takes some other form.