Tax and NICs treatment where the new rules apply:
Under the modified approach intermediaries, and not clients,
will be responsible for operating the legislation. It
will not be necessary for clients to check whether the
legislation applies when they enter into a contract with
an intermediary, or to conduct new checks on the status
of the intermediary. There will be no certification scheme.
The
intention is that all the money received by the intermediary
in respect of a relevant engagement, minus certain
deductions listed below, should be treated as paid to
the worker in a form subject to Schedule E tax and Class
1 NICs.
The intermediary:
(a) Intermediaries who
are companies
Where a company intermediary
receives income in respect of a relevant engagement,
then :
1. the intermediary will operate PAYE and
pay NICs on payments of salary to the worker during
the year, in the normal way.
2. If, at the end of a
tax year, the total of the worker's employment income
from the intermediary, including benefits in kind, amounts
to less than the intermediary’s
income from all that worker’s relevant engagements,
then the difference (net of allowable expenses
described below) will be deemed to have been paid
to the worker as salary on 5 April, and Schedule
E tax/NICs will be due.
Where salary is deemed in this
way:
(a) appropriate
deductions will be allowed in arriving at Corporation
Tax profits;
and
(b) no
further tax/NICs will be due if the worker subsequently
withdraws the money from the company.
(b) Where the intermediary is a partnership
Where
a partnership receives gross payment under a relevant
contract:
1. Income of the partnership from all relevant engagements
in the year (net of allowable expenses described
below) will be deemed to have been paid to the worker
on 5 April as salary from a deemed employment held by
the worker, and Schedule E tax /NICs will be due accordingly.
Any
amount deemed to be income within Schedule E/Class 1
under (i) above will not be included when computing the
worker’s share of Schedule D partnership profits.
2.
However, the Inland Revenue’s current
practice of including small amounts of Schedule
E income in the calculation of Schedule D profits
for the self employed, including partners, will
apply also in these cases.
<<<
previous page | next
page >>>
