Implications for the end client

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Implications for the end client
  • The contract
  • HMRC enquiries
  • Cases where the end client is a public sector body

This guidance note considers the position of an end client who is not a public sector body. Different rules apply where the end client is a public sector body ― see the Service companies and the public sector guidance note.

There are a number of advantages to the end client in engaging the services of an individual via a company rather than as an employee. If there is an employment relationship, the engager has to operate PAYE on the amounts paid to the employee, and has to pay secondary National Insurance contributions (NICs) (currently payable at a rate of 13.8%), as well as complying with numerous employment law requirements. Engaging a company to provide the same services can save those costs and ensure most of those obligations do not apply. See the Personal service companies overview guidance note. But there are some factors that the engager should bear in mind when considering contracting with a company rather than an individual for the services of that individual.

The contract

If the company offering the services of the individual in question is to minimise the risk of being caught by IR35, it may seek to include certain clauses in the contract with the engager. Key components of a contract which would HMRC would see as indicative that the arrangement is outside IR35 would include:

  • a recital stating that the contract is f

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