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HMRC internal manual

Employment Status Manual

Introduction: how to work out when the legislation applies - example

This section provides an example of a situation in which the intermediaries legislation would apply.


Mr A is a computer programmer. He negotiates a contract with the information technology department of a large institution (the end client). Under this contract, which will last for 12 months starting on 1 May 2016, he is engaged on terms and conditions that would make him an employee of the end client if taken on directly. However, having negotiated the terms of the contract, the agreement for the supply of Mr A’s services is made between the end client and Mr A’s company, A Services Ltd, in which he owns all of the shares. There is no contract between Mr A and the end client.

  • Mr A (the worker) is under an obligation to personally perform services for another person (the end client)

  • the services are not provided under a contract directly between the end client and the worker but under arrangements involving a third party, A Services Ltd (the intermediary)

  • if the services had been provided under a contract directly between Mr A and the end client, he would be regarded as an employee of the end client for tax and NICs purposes.

In addition;

  • Mr A owns shares in the intermediary and is entitled to receive dividends from the company. He therefore has rights entitling him to receive a payment from the intermediary that is not chargeable to tax as employment income

  • Because Mr A owns all of the shares in the intermediary he has a material interest in it and thus the conditions of liability where the intermediary is a company are satisfied (see ESM8045).