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HMRC internal manual

Employment Status Manual

Employment intermediaries’ travel expense provisions: the basic conditions - type of employment intermediary

Income Tax (Earnings and Pensions) Act 2003 (ITEPA), Part 5, Chapter 2, sections 337 to 339A

Social Security (Contributions) Regulations 2001,  Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB

For the employment intermediaries travel expense provisions to apply two basic conditions [ESM5530] must both be met. The second of these basic conditions is that:

‘the services are provided, not under a contract directly between the client or a person connected with the client and the worker but under arrangements involving an employment intermediary’ (section 339A (1)(b) ITEPA)

Type of employment intermediary

An employment intermediary is an entity which sits between a worker and client as part of the arrangements under which the worker personally provides services to the client. In these circumstances the worker isn’t working under a direct contract between themselves and the client (or a person connected with the client) but is working under arrangements involving the employment intermediary.

For the employment intermediaries travel expense provisions to apply the employment intermediary must be a person, other than the worker or the client (or a person connected with the client), who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour.

This will include employment intermediaries which are:

  • a company (including a limited company, a PSC, an MSC or an unincorporated company)
  • a partnership
  • an agency
  • an employment or recruitment business
  • an umbrella company
  • an individual

 

Employment intermediaries within the scope of the intermediaries legislation

The employment intermediaries travel expense provisions are modified [ESM5580] when a worker personally provides their service through an intermediary which needs to consider and may be subject to the intermediaries legislation [ESM3000]. This is regardless of whether the intermediaries legislation does or doesn’t apply. HMRC considers that this modification can apply when a worker provides their personal services via a PSC and for NICs purposes only in circumstances involving other intermediaries, such as an umbrella company, for the period 6 April 2016 to 5 July 2016.

The modification doesn’t apply in any circumstances to companies which are MSCs or would be if the only reason why they are not is because the worker gets all their income by way of employment income - [ESM5570].

For the modifications relating to employment intermediaries within the scope of the intermediaries legislation - [ESM5580].

Businesses that don’t fall into the definition of an ‘employment intermediary’

The employment intermediaries travel expense provisions don’t apply when an intermediary business doesn’t fall within the definition of an ‘employment intermediary’.