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HMRC internal manual

Employment Status Manual

Introduction: summary of the intermediaries legislation

Income Tax (Earnings and Pensions) Act (ITEPA) 2003, Part 2

Finance Act 2000, Schedule 12

Welfare Reform & Pensions Act 1999 Sections 75 & 76

Social Security Contributions (Intermediaries) Regulations 2000 (SI 2000 No.727)

Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000 (SI 2000 No.728)

The use of intermediaries, such as service companies and partnerships, has the potential to:

  • reduce or avoid an individual worker’s personal tax/NICs liability and
  • reduce or avoid liability to employer’s NICs.

Legislation was introduced with effect from 6 April 2000 to counter this:

For tax - originally, in Finance Act 2000, Schedule 12. From 6 April 2003 tax legislation is in the Income Tax (Earnings and Pensions) Act (ITEPA) 2003, Part 2, Chapter 8.

For NICs - in the Welfare Reform and Pensions Act 1999, section 75 with the detail in the Social Security Contributions (Intermediaries) Regulations 2000. NICs legislation cannot be included in Finance Acts so, in order to be able to introduce these anti-avoidance measures for both tax and NICs purposes at the same time, the NICs aspects were included in the Welfare Reform and Pensions Act 1999. In Northern Ireland, the equivalent NICs provisions are in section 76 of the Welfare Reform and Pensions Act 1999 and the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000. For simplicity, reference is made only to the Great Britain legislation in the rest of this guidance.

The intermediaries legislation applies to income received in respect of services performed on or after 6 April 2000.

Further information

Managed Service Company (MSC) legislation was introduced from 6 April 2007 (Chapter 9 ITEPA 2003). The MSC Legislation applies to individuals providing their services through intermediaries which meet the definition of a Managed Service Company. Intermediaries must therefore first consider whether the MSC Legislation applies. Those that do not meet the definition of an MSC must continue to consider the intermediaries legislation (chapter 8).

The Government initiated a review of the intermediaries legislation during 2010 which led to changes in the way HMRC administers the legislation. HMRC subsequently conducted a public consultation during 2016 which resulted in wider changes to the way HMRC administers the intermediaries legislation for engagements involving a Public Sector client. Further information on these changes can be seen at ESM9000 onwards.