The following Owner-Managed Businesses guidance note Produced 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 NIC 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 PSC. From April 2017 similar anti-avoidance rules apply to individuals who would be employees of public sector bodies if they had not used an intermediary and these rules are extended to large and medium businesses in the private sector from 6 April 2021, see the Where are we now with personal service companies? guidance note for more details.
The provisions also apply to individuals who are an ‘office-holder’ of the client when the services they provide relate to the duties of that 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 and other cases are discussed below.
From Ready Mixed Concrete, there are three ‘preconditions’ which are essential for the existence of an employment:
the obligation for personal service
submitting to significant control of the employer, and
consistency with other conditions of employment
The issue of personal service is often seen as focusing around the right of substitution. That is, it is inherently inconsistent with employment to have the right to send somebody else to perform the contracted services. However, this test has become more complex over time as contracts with a substitution clause which is
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
The basic rule is that all benefits provided to an employee by reason of their employment are taxable unless there is a specific exemption or other rule that means they are not chargeable to tax.ExemptionsThe main exemptions for employee benefits are in ITEPA 2003, ss 227–326B (Pt 4).Below is an
Time for paymentTwo statutory rules apply on death:•tax is ‘due’ six months after the end of the month of death and carries interest from the ‘due’ date until paidThere is a possibility of payment by instalments, but this applies to certain types of property only ― see the ‘Availability of
Class 1 and Class 1AClass 1 and Class 1A are the categories of NIC that can be charged on expenses reimbursed and benefits provided to employees. These classes are mutually exclusive. A benefit cannot be subject to both Class 1 and Class 1A NIC. Three requirements must be met before Class 1A NIC is
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.