The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
Many people supply their services to clients, not directly as a self-employed person, but via a company. The tax and NICs advantages of this way of working are significant ― see the Introduction to personal service companies guidance note. For the rules generally, see the Personal service company rules guidance note.
Since April 2000, anti-avoidance legislation, known as ‘IR35’, catches individuals who would be employees of their clients if they had not used a service company. Since April 2017 similar anti-avoidance rules apply to individuals who would be employees of public sector bodies if they had not used an intermediary.
Both sets of rules apply to individuals who are office-holders and receive payment through an intermediary. The employment status test is not required in respect of services that are provided in respect of the duties of an office.
In UK legislation, an employee is defined as “an individual who has entered into or works under... a contract of employment” with ‘contract of employment’ defined as “a contract of service or apprenticeship, whether express or implied”.
This is as far as legislation goes. Therefore, the characteristics of employment are dependent on case law concerning the definition of a “contract of service”. The authority on this is widely seen as Ready Mixed Concrete.
This case has been cited in most of the modern employment status cases. Justice McKenna’s statement, which has often been reaffirmed, gives firm characteristics of employment:
“I must now consider what is meant by a contract of service. A contract of service exists if the following three conditions are fulfilled: (i) The servant agrees that in
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