The Social Security (Miscellaneous Amendments No. 2) Regulations 2017

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make a number of consequential amendments and insert new regulations into the Social Security (Intermediaries) Regulations 2000 (S.I. 2000/727) (“the Intermediaries Regulations”) and the Social Security (Intermediaries) (Northern Ireland) Regulations 2000 (S.I. 2000/728) (the N.I Intermediaries Regulations”). Consequential amendments are also made to the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) (“the Contributions Regulations”). The amendments reflect new provisions to be inserted into the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”).

Regulations 2 and 3 insert new regulations 2A, 3A and 13 to 23 into the Intermediaries Regulations and the N.I Intermediaries Regulations respectively as follows—

• new regulation 2A makes consequential changes to the definitions that will now relate to Part 1 only. The new inserted regulations will constitute Part 2 of the Regulations;

• new regulation 3A introduces a new definition of “public authority” which will apply for Parts 1 and 2;

• new Part 2 contains inserted regulations 13 to 23;

• new regulation 13 defines the engagement to which the new regulations in Part 2 will apply together with provisions which set out the qualifying conditions for the legislation to apply, and the terms on which the services are provided;

• new regulation 14 sets out the preliminary qualifying conditions (A to C) for the types of intermediary in a contractual chain, and defines and identifies the fee-payer in those chains. This regulation treats the worker as receiving earnings and sets out the requirements that fall on the fee-payer. It also explains the circumstances where obligations may move elsewhere within the contractual chain including situations involving non-resident fee-payers;

• new regulation 15 defines the qualifying conditions where the intermediary is a company and sets out the definitions of “associated company” and “material interest” to be used in respect of that regulation;

• new regulation 16 defines the qualifying conditions where the intermediary is a partnership and sets out the definition of “relative” to be used in respect of that regulation;

• new regulation 17 sets out four steps required to calculate the “deemed direct earnings”. The paragraphs contained in new regulation 17 explain each step and its constituent parts, including the various deductions which can be made. Where the chain payment has been reduced by tax and national insurance contributions this deduction needs to be added back for the purposes of the first step of the calculation at regulation 17(1);

• new regulation 18 applies various sections of the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 to the deemed direct earnings, to treat the worker as if they were an employed earner, and the services are treated as performed by the worker in the course of performing the duties of that employment. New regulation 18 treats the person who is treated as making the deemed direct earnings as the secondary contributor;

• new regulation 19 makes provision enabling persons who have been treated as making payments of deemed direct earnings to make certain deductions of amounts representing the national insurance contributions that they have been obligated to pay to the Commissioners of Her Majesty’s Revenue and Customs prior to making payment to the recipient;

• new regulation 20 outlines the information to be provided by the client to the person they are directly contracting with, and the consequences of failure to do so. The provisions set out the basic form that information must take and the time limits for providing it;

• new regulation 21 outlines the information to be provide by the worker to the potential deemed employer, and the consequences of failure to do so.

• new regulation 22 outlines the consequences of providing fraudulent information and explains the fraudulent documentation condition; and

• new regulation 23 makes provision for ensuring that there is not a double liability to national insurance contributions. In particular it prevents a further deduction of national insurance contributions where the intermediary subsequently pays remuneration to the worker and that is derived from the payment from the public authority.

Regulation 4 makes consequential amendments to paragraph 3ZB of Part 8 of Schedule 3 and Part 2 of Schedule 4 to the Contributions Regulations by inserting new sub-paragraphs (6D) to (6F) and 7(1A) into those provisions to reflect amendments to be inserted into section 339A of the Income Taxes (Earnings and Pensions) Act 2003 (c 1). Sub-paragraph (1A) of paragraph 7 enables the fee payer to make a deduction in relation to national insurance contributions from the actual payment they are making to the intermediary for the worker’s services.

A Tax Information and Impact Note covering the changes made by these Regulations was published on 8th March 2017 and is available on the website at: https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.