The Social Security Contributions (Intermediaries) Regulations 2000

Made: 13th March 2000

Laid before Parliament: 13th March 2000

Coming into force: 6th April 2000

The Treasury, with the concurrence of the Secretary of State for Social Security, in exercise of the powers conferred on them by sections 4A, 122(1) and 175(1A), (2) to (4) of the Social Security Contributions and Benefits Act 1992 and of all other powers enabling them in that behalf, and the Commissioners of Inland Revenue, in exercise of the powers conferred on them by section 8(1)(m) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 and of all other powers enabling them in that behalf, hereby make the following Regulations:

Citation, commencement and effect

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• (1) These Regulations may be cited as the Social Security Contributions (Intermediaries) Regulations 2000 and shall come into force on 6th April 2000.

• (2) These Regulations have effect for the tax year 2000–01 and subsequent years and apply in relation to services performed, or to be performed, on or after 6th April 2000.

• (3) Payments or other benefits in respect of such services received before that date shall be treated as if received in the tax year 2000–01.

Interpretation

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• (1) In these Regulations unless the context otherwise requires–

• ...

• “associate" has the meaning given by regulation 3;

• “attributable earnings" in relation to a worker shall be construed in accordance with regulation 6(3)(a);

• “the Board” means the Commissioners for Her Majesty’s Revenue and Customs;

• ...

• “Class 1A contributions" has the meaning given by section 10 of the Contributions and Benefits Act ;

• ...

• “company" means any body corporate or unincorporated association, but does not include a partnership;

• “the Contributions and Benefits Act" means the Social Security Contributions and Benefits Act 1992;

• “the Contributions Regulations” means the Social Security (Contributions) Regulations 2001;

• “CTA 2010” means the Corporation Taxes Act 2010;

• ...

• “public authority” has the meaning given by regulation 3A;

• “relevant benefit" means any benefit falling within regulation 4 that is provided to the intermediary or to or on behalf of the worker under the arrangements;

• “relevant payment" means any payment made to an intermediary or to or on behalf of the worker under the arrangements;

• “secondary Class 1 contributions" has the meaning given by section 6 of the Contributions and Benefits Act ;

• “secondary contributor" has the meaning given by section 7 of the Contributions and Benefits Act ;

• “statutory auditor” has the meaning given by Part 42 of the Companies Act 2006.

• “the Taxes Act" means the Income and Corporation Taxes Act 1988 ;

• “tax year" means year of assessment;

• ...

• (2) References in these Regulations to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in his capacity as a member of the partnership or association.

• (3) For the purposes of these Regulations–

• (a) anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and

• (b) a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.

• (4) The reference in paragraph (3)(b) to an individual’s family or household shall be construed in accordance with sections 721(4) and (5) of ITEPA 2003.

• (5) For the purposes of these Regulations, two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other.

• (7) For the purposes of these Regulations “connected” shall be construed in accordance with section 993 of the Income Tax Act 2007.

• (8) For the purposes of these Regulations “controlled” shall be construed in accordance with section 995 of the Income Tax Act 2007.

Meaning of associate

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• (1) In these Regulations “associate"–

• (a) in relation to an individual, has the meaning given by section 417(3) and (4) of the Taxes Act , subject to the following provisions of this regulation;

• (b) in relation to a company, means a person connected with the company within the meaning of section 839 of the Taxes Act ; and

• (c) in relation to a partnership, means any associate of a member of the partnership.

• (2) Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of his by reason only of that interest except in the following circumstances.

• (3) The exception is where–

• (a) the individual, either on his own or with one or more of his associates, or

• (b) any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 per cent. of the ordinary share capital of the company.

• (4) In paragraph (2) “employee benefit trust" has the same meaning as in sections 550 and 551 of ITEPA 2003.

Meaning of benefit

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• (1) For the purposes of these Regulations a “benefit” means anything that, if received by an employee for performing the duties of an employment, would be general earnings of the employment.

• (2) The amount of a benefit is taken to be–

• (a) in the case of a cash benefit, the amount received, and

• (b) in the case of a non-cash benefit, the cash equivalent of the benefit.

• (3) The cash equivalent of a non-cash benefit is taken to be whichever is the greater of–

• (a) the amount that would, for income tax purposes, be general earnings if the benefit were general earnings from an employment, and

• (b) the cash equivalent determined in accordance with section 398(2)(b) of 2003.

• (4) For the purposes of these Regulations a benefit is treated as received–

• (a) in the case of a cash benefit, when payment is made of or on account of the benefit; and

• (b) in the case of an non-cash benefit, when it is used or enjoyed.

Meaning of intermediary

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• (1) In this Part “intermediary" means any person, including a partnership or unincorporated association of which the worker is a member–

• (a) whose relationship with the worker in any tax year satisfies the conditions specified in paragraph (2), (6), (7) or (8), and

• (b) from whom the worker, or an associate of the worker–

• (i) receives, directly or indirectly, in that year a payment or benefit that is not chargeable to tax as employment income under ITEPA 2003, or

• (ii) is entitled to receive, or in any circumstances would be entitled to receive, directly or indirectly, in that year any such payment or benefit.

• (2) Where the intermediary is a company the conditions are that–

• (a) the intermediary is not an associated company of the client, within the meaning of section 416 of the Taxes Act , by reason of the intermediary and the client both being under the control of the worker, or under the control of the worker and another person; and

• (b) either–

• (i) the worker has a material interest in the intermediary, or

• (ii) the payment or benefit is received or receivable by the worker directly from the intermediary, and can reasonably be taken to represent remuneration for services provided by the worker to the client.

• (3) A worker is treated as having a material interest in a company for the purposes of paragraph (2)(a) if–

• (a) the worker, alone or with one or more associates of his, or

• (b) an associate of the worker, with or without other such associates,

has a material interest in the company.

• (4) For this purpose a material interest means–

• (a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5 per cent. of the ordinary share capital of the company; or

• (b) possession of, or entitlement to acquire, rights entitling the holder to receive more than 5 per cent. of any distributions that may be made by the company; or

• (c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5 per cent. of the assets that would then be available for distribution among the participators.

• (5) Where the intermediary is a partnership the conditions are as follows.

• (6) In relation to payments or benefits received or receivable by the worker as a member of the partnership, the conditions are–

• (a) that the worker, alone or with one or more relatives, is entitled to 60 per cent. or more of the profits of the partnership; or

• (b) that most of the profits of the partnership derive from the provision of services under the arrangements–

• (i) to a single client, or

• (ii) to a single client together with an associate or associates of that client; or

• (c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under the arrangements.

• (7) In relation to payments or benefits received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit–

• (a) is received or receivable by the worker directly from the intermediary, and

• (b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

• (8) Where the intermediary is an individual the conditions are that the payment or benefit–

• (a) is received or receivable by the worker directly from the intermediary, and

• (b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

Provision of services through intermediary

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• (1) This Part applies where–

• (a) an individual (“the worker") personally performs, or is under an obligation personally to perform, services for another person (“the client"), who is not a public authority

• (aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (ab) the client either qualifies as small for a tax year or does not have a UK connection for a tax year,

• (b) the performance of those services by the worker is carried out, not under a contract directly between the client and the worker, but under arrangements involving an intermediary, and

• (c) the circumstances are such that, had the arrangements taken the form of a contract between the worker and the client, the worker would be regarded for the purposes of Parts I to V of the Contributions and Benefits Act as employed in employed earner’s employment by the client.

• (2) Paragraph (1)(b) has effect irrespective of whether or not–

• (a) there exists a contract between the client and the worker, or

• (b) the worker is the holder of an office with the client.

• (2A) Holding office as a statutory auditor of the client does not count as the worker being the holder of an office with the client for the purposes of paragraph 6(2)(b).

• (2B) The condition in paragraph (1)(ab) is to be ignored if—

• (a) the client concerned is an individual, and

• (b) the services concerned are performed otherwise than for the purposes of the client's business.

• (2C) For the purposes of paragraph (1)(ab) the client is to be treated as not qualifying as small for the tax year concerned if the client is treated as medium or large for that tax year by reason of regulation 20A(3)(a).

• (3) Where this Part applies–

• (a) the worker is treated, for the purposes of Parts I to V of the Contributions and Benefits Act, and in relation to the amount deriving from relevant payments and relevant benefits that is calculated in accordance with regulation 7 (“ the worker’s attributable earnings"), as employed in employed earner’s employment by the intermediary, and

• (b) the intermediary, whether or not he fulfils the conditions prescribed under section 1(6)(a) of the Contributions and Benefits Act for secondary contributors, is treated for those purposes as the secondary contributor in respect of the worker’s attributable earnings,

and Parts I to V of that Act have effect accordingly.

• (4) Any issue whether the circumstances are such as are mentioned in paragraph (1)(c) is an issue relating to contributions that is prescribed for the purposes of section 8(1)(m) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (decision by officer of the Board).

Worker’s attributable earnings—calculation

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• (1) For the purposes of regulation 6(3)(a) the amount of the worker’s attributable earnings for a tax year is calculated as follows:

Step OneFind the total amount of all payments and benefits received by the intermediary in that year under the arrangements but excluding amounts on which Class 1 or Class 1A contributions are payable by virtue of regulation 3 or 4 of the Social Security Contributions (Limited Liability Partnership) Regulations 2014, and reduce that amount by 5 per cent.

Step TwoAdd the amount of any payments and benefits received by the worker in that year under the arrangements, otherwise than from the intermediary, that–aare not chargeable to income tax as employment income under ITEPA 2003, andbwould be so chargeable if the worker were employed by the client.

Step ThreeDeduct the amount of any expenses met in that year by the intermediary that under ITEPA 2003 would have been deductible from the taxable earnings of the employment, within the meaning of section 10 of ITEPA 2003, in accordance with section 327(3) to (5) of that Act if the worker had been employed by the client and the expenses had been met by the worker out of those earnings.

Step FourDeduct the amount of any capital allowances in respect of expenditure incurred by the intermediary in that year that could have been claimed by the worker under Part 2 of the Capital Allowances Act 2001 (plant and machinery allowances) by virtue of section 15(1)(i) of that Act (which provides that employment is a qualifying activity for the purposes of that Part)) if the worker had been employed by the client and had incurred the expenditure.

Step FiveDeduct any contributions made in that year for the benefit of the worker by the intermediary to a registered pension scheme for the purposes of Part 4 of the Finance Act 2004that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee, and any payments made in that year in respect of the worker by the intermediary in respect of any of the Pensions Act levies.This does not apply to excess contributions made and later repaid.

Step SixDeduct the amount of secondary Class 1 contributions and Class 1A contributions paid by the intermediary for that year in respect of earnings of the worker.

Step SevenDeduct–athe amount of any payments made by the intermediary to the worker in that year that constitute remuneration derived from the worker’s employment by that intermediary including, where the intermediary is a body corporate and the worker is a director of that body corporate, payments treated as remuneration derived from that employment by virtue of regulation22(2) of the Contributions Regulations (payments to directors to be treated as earnings), but excluding payments which represent items in respect of which a deduction was made under Step Three and payments within paragraph 25 of Part 10 of Schedule 3 to the Contributions Regulations, andbthe amount of any benefits provided by the intermediary to the worker in that year, being benefits that constitute amounts of general earnings in respect of which Class 1A contributions are payable, but excluding any benefits which represent items in respect of which a deduction was made under Step Three.If the result at this point is nil or a negative amount, there are no worker’s attributable earnings for that year.

Step EightFind the amount that, together with the amount of secondary Class 1 contributions payable in respect of it, is equal to the amount resulting from Step Seven (if that amount is a positive amount).