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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Conditions of liability: where the intermediary is a company and the worker does not have a material interest

Paragraph 3(1)(b) Schedule 12 Finance Act 2000/Section 51(1)(b) ITEPA 2003

Regulation 5(2) SI 2000 No. 727

You may come across cases where a worker’s shareholding falls below the 5% ordinary share capital. For example, services may be provided through a composite service company with more than 20 workers.

In such situations, in order to establish whether the conditions of liability have been met, you will have to consider:

  • the relationship between the amount received, or receivable, by the worker, and
  • the amount earned by that worker from the work performed for the client

The legislation provides that a company intermediary will satisfy the conditions of liability where:

  • the worker receives or is entitled to receive a payment or benefit directly from the intermediary that is not otherwise chargeable to tax as employment income, and
  • the payment or benefit can reasonably be taken to represent remuneration for services provided by the worker to the client.

Where it is apparent that the two can be linked then this test will be satisfied.