Corporation Tax Act 2009

Qualifying expenditure on externally provided workers

1127 “Qualifying expenditure on externally provided workers”

(1) For the purposes of this Part a company incurs expenditure on externally provided workers if—

(a) it makes a payment (a “staff provision payment”) to another person (the “staff provider”), and

(b) the payment is in respect of the supply to the company, by or through the staff provider, of the services of any externally provided workers.

(2) The company’s qualifying expenditure on externally provided workers is determined in accordance with section 1129 or 1131.

(3) In sections 1128 to 1131 references to “staff provider” and “staff provision payment” are to be read in accordance with subsection (1).

1128 “Externally provided worker”

(1) For the purposes of this Part a person is an “externally provided worker” in relation to a company if each of conditions A to G is met.

(2) Condition A is that the worker is an individual.

(3) Condition B is that the worker is not a director or employee of the company.

(4) Condition C is that the worker personally provides, or is under an obligation personally to provide, services to the company.

(5) Condition D is that the worker is subject to (or to the right of) supervision, direction or control by the company as to the manner in which those services are provided.

(6) Condition E is that the worker’s services are supplied to the company through a staff provider (whether or not the worker is a director or employee of the staff provider or any other person).

(7) Condition F is that the worker provides, or is under an obligation to provide, those services personally to the company under the terms of a contract between the worker and the staff provider.

(8) Condition G is that the provision of those services does not constitute the carrying on of activities contracted out by the company.

1129 Qualifying expenditure on externally provided workers: connected persons

(1) This section applies if—

(a) a company makes a staff provision payment,

(b) the company and the staff provider are connected, and

(c) in accordance with generally accepted accounting practice, the whole of the staff provision payment and all of the staff provider’s relevant expenditure have been brought into account in determining the staff provider’s profit or loss for a relevant period.

(2) The company’s qualifying expenditure on externally provided workers is—

(a) the entire staff provision payment, or

(b) if less, an amount equal to the staff provider’s relevant expenditure.

(3) “Relevant expenditure” of the staff provider means expenditure that—

(a) is incurred by the staff provider in providing for the company the externally provided workers to whom the staff provision payment relates,

(b) is not of a capital nature, and

(c) is incurred on staffing costs or agency workers' remuneration.

(4) “Relevant period” means a period—

(a) for which accounts are drawn up for the staff provider, and

(b) that ends not more than 12 months after the end of the company’s period of account in which the staff provision payment is, in accordance with generally accepted accounting practice, brought into account in determining the company’s profit or loss.

(5) In section 1123 (meaning of “staffing costs”), which applies for the purpose of determining whether the staff provider’s expenditure meets the requirements of subsection (3)(c), references to a company are to be read as references to the staff provider.

(6) “Agency workers' remuneration”, in the case of any person who is an externally provided worker in relation to the company, means remuneration that—

(a) is receivable by the worker under or in consequence of the contract mentioned in section 1128(7), but

(b) does not constitute employment income of the worker apart from Chapter 7 of Part 2 of ITEPA 2003 (application of provisions to agency workers).

(7) Any apportionment of expenditure of the company or staff provider necessary for the purposes of this section is to be made on a just and reasonable basis.

1130 Election for connected persons treatment

(1) A company and a staff provider who are not connected may jointly elect that section 1129 is to apply to them as if they were connected.

(2) Any such election must be made in relation to all staff provision payments paid under the same contract or other arrangement.

(3) The election must be made by notice in writing to an officer of Revenue and Customs.

(4) The notice must be given before the end of the period of two years beginning immediately after the end of the company’s accounting period in which the contract or other arrangement is entered into.

(5) An election under this section is irrevocable.

1131 Qualifying expenditure on externally provided workers: other cases

(1) This section applies if—

(a) a company makes a staff provision payment,

(b) the company and the staff provider are not connected persons, and

(c) no election is made under section 1130.

(2) The company’s qualifying expenditure on externally provided workers is 65% of the staff provision payment.

1132 External workers: attributable expenditure

(1) This section applies for the purposes of this Part to identify when qualifying expenditure on externally provided workers is attributable to relevant research and development.

(2) Qualifying expenditure on externally provided workers is so attributable if the workers are directly and actively engaged in relevant research and development.

(3) Subsection (4) applies if an externally provided worker is partly engaged directly and actively in relevant research and development.

(4) The appropriate proportion of the qualifying expenditure relating to the worker is treated as attributable to relevant research and development.

(5) Subsection (6) applies if persons provide services (such as secretarial or administrative services) in support of activities carried on by others.

(6) Those persons are not, as a result of providing those services, to be treated as themselves directly and actively engaged in those activities.