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Income Tax (Earnings and Pensions) Act 2003

Section 49: Engagements to which this Chapter applies

195.Subsection (1) sets out when the provisions of the Chapter apply. It derives from paragraph 1(1). There are three elements to be satisfied in order for the Chapter to apply:

  • an individual (“the worker”) personally performs, or is under an obligation to perform, services for the purposes of a business carried on by another person (“the client”)

  • the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

  • the circumstances are such that, if the services were provided under a contract directly between the worker and the client, the worker would be regarded for income tax purposes as an employee of the client.

196.Subsection (2) expands on the interpretation of “business” given in section 61 for the purposes of subsection (1)(a). That interpretation only extends to trades, professions, vocations and Schedule A businesses. This would not normally include the activities of, say, a Government Department delivering public services, so subsection (2) is needed to bring in the other instances where individuals provide services through intermediaries. It derives from paragraph 1(2).

197.Subsection (3) expands on the meaning of “third party” used in subsection (1)(b). If the intermediary is a partnership, the worker would be a member of that partnership – subsection (3) is needed to make sure that such a partnership (or other unincorporated association) counts as a third party for the purposes of subsection (1)(b). This material derives from the paragraph 1(1)(b).

198.Subsection (4) ensures that the wide phrase “the circumstances” used in subsection (1)(c) can include the terms on which the services are provided and the contractual arrangements under which they are provided throughout the whole chain of relationships between worker and client, rather than focusing only on the contract to which the worker is a party. This provision is drawn from paragraph 1(4).

199.This Chapter does not include the material in paragraph 1(5). That sub-paragraph said:

The fact that the worker holds an office with the client does not affect the application of this Schedule.

200.Even without such a statement, the fact that a worker holds an office with the client has no relevance to the operation of these provisions. See Note 12 in Annex 2.

201.Subsection (5) brings forward the explanation of the label “engagement to which this Chapter applies”. In Schedule 12 to FA 2000 the equivalent term is not explained until paragraph 21(1), although it is used several times in the early paragraphs of that Schedule.

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