ESM5650 - Employment intermediaries travel expense provisions: fraudulent documents

Income Tax (Earnings and Pensions) Act 2003 (ITEPA), Part 5, Chapter 2, section 339A (7), (8) and (9))

HMRC recognises that an employment intermediary may be provided with one or more fraudulent documents intended to demonstrate that the provisions of section 339A don’t apply to a worker’s arrangements, due to the worker not being subject to (or to the right of) SDC by any person as to the manner in which the worker provides their services.

Where such a document is produced, providing the employment intermediary was unaware the document was fraudulent and it has acted upon that document in good faith for PAYE purposes, then the employment intermediary won’t be held to be the employer of the worker for the unpaid tax due as a result of the application of section 339A. The party providing the fraudulent document will instead be held to be the employer of the worker in relation to the tax due on the travel and subsistence payments as explained below.

A fraudulent document is one intentionally produced to misrepresent whether SDC is present in how a worker carries out their role, in order for them to benefit from relief on travel and subsistence.

The provisions relating to fraudulent documents don’t apply where the test of SDC doesn’t need to be considered.

Fraudulent document(s) provided by the client

If, either before or after the worker begins to provide the services, the client provides the employment intermediary with one or more fraudulent documents to demonstrate the worker isn’t subject to (or to the right of) SDC by any person as to the manner in which they provide their services, then after the fraudulent document is provided the worker will be treated as holding an employment with the client (the duties of which consist of the services) in respect of any payments made to which section 339A of ITEPA applies.

The client will be required to account for the unpaid tax as if it arose in respect of earnings from that employment. The client will be responsible for the operation of PAYE for tax purposes, plus any penalties imposed and interest accrued.

Fraudulent document(s) provided by a relevant person

Where the fraudulent document is provided by a ‘relevant person’, the worker will be treated as holding an employment with that relevant person and the relevant person will be required to account for unpaid tax.

In this context, a ‘relevant person’ means a person other than the client, the worker or a person connected with the employment intermediary, who:

  • is resident, or has a place of business in the UK, and
  • is party to a contract with the employment intermediary or a person connected with the employment intermediary under or in consequence of which:
  • the services are provided, or
  • the employment intermediary, or a person connected with the employment intermediary, makes payments in respect of the services

Further information

Liabilities of the parties and transfer of debt provisions - [ESM5660].