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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Conditions of liability: where the client is a private client

Paragraph 1(1)(a) Schedule 12 Finance Act 2000/Section 49(1)(a) ITEPA 2003

Regulation 6(1)(a) SI 2000 No. 727

The legislation only applies where services are provided for the purposes of a business carried on by another client. The definition of business includes any trade, profession, or vocation including a Schedule A business (see PIM 1003 and 1020). It does not apply where the services are provided to a client who is not in business.

Example 1

Mr P, who provides gardening services, works through a service company which has a contract to supply his services to maintain the grounds of the Head Office of an insurance company of which Mrs Smith is the Chief Executive. The insurance company is in business and the contract may therefore be a relevant engagement.

Example 2

Mr P’s company also has a contract to maintain Mrs Smith’s garden at her private residence. The contract is with Mrs Smith in a private capacity and so the contract cannot be a relevant engagement for the purposes of the legislation; the services are not being provided for the purposes of a business. If the contract had been with Mrs Smith’s employer, who was providing a benefit in kind to her, the contract could be a relevant engagement since the employer is in business.

Example 3

Mrs Smith also owns a block of flats, which she rents out. Mr P’s company has the contract to maintain the grounds for this property. This is a Schedule A business and the contract may be a relevant engagement.