Service provision changes

Produced by Tolley in association with Dr John McMullen, Partner, Stone King LLP and Visiting Professor of Law, Durham University
Service provision changes

The following Employment Tax guidance note Produced by Tolley in association with Dr John McMullen, Partner, Stone King LLP and Visiting Professor of Law, Durham University provides comprehensive and up to date tax information covering:

  • Service provision changes
  • Practical assessment
  • Retention of key personnel

A change of service provider may amount to a ‘service provision change’ within the meaning of the TUPE, whether or not it is also a ‘business transfer’. See the Transfer of undertakings overview guidance note.

A service provision change may involve any one of three possibilities:

OutsourcingWhere activities cease to be carried out by a business on its own behalf and are carried out instead by a contractorSI 2006/246, reg 3(1)(b)(i)
Change of contractorWhere activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another contractor on the client’s behalfSI 2006/246, reg 3(1)(b)(ii)
InsourcingWhere activities cease to be carried out by a contractor or a subsequent contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are once again carried out instead by the client on his own behalfSI 2006/246, reg 3(1)(b)(iii)

These three situations involve the transfer of activities from a ‘client’ (party that will receive a service) to a ‘contractor’ (party providing the service), or back again, or from one contractor to another contractor, including professional services. In all three of these cases the TUPE rules apply if the activities remain fundamentally the same both before and after the transfer (SI 2006/246, reg 3(2A)).

In all cases, irrespective of who is providing the service, there is a ‘client’ that is the party receiving the service. For there to be a service provision change, the services in question must be carried out on behalf

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