Income Tax (Earnings and Pensions) Act 2003

[F1 61Z1 Purported umbrella companies U.K.

(1) Subsection (5) applies if any of the following cases applies.

(2) Case 1 is that—

(a) a person (“the purported umbrella company”) participates in arrangements that would, if an individual were employed by the purported umbrella company, result in the umbrella company arrangements conditions being met in relation to services the individual provides to the client,

(b) either—

(i) it is reasonable to suppose that one or more participants in the arrangements, other than the purported umbrella company or the individual, would assume that the purported umbrella company is the employer of that individual, or

(ii) the purported umbrella company has taken any step that it is reasonable to suppose was intended to give the impression to any person (whether or not that impression is given) that the purported umbrella company is the employer of the individual,

(c) the individual is not employed by the purported umbrella company, and

(d) if the individual were employed by the purported umbrella company subsection (2) of section 61Y would apply.

(3) Case 2 is that—

(a) a person (“the purported umbrella company”) participates in arrangements that would, if an individual were employed by the purported umbrella company, result in the umbrella company arrangements conditions being met in relation to services the individual provides to the client,

(b) the individual would, ignoring this section, be treated as employed by the purported umbrella company as a result of Chapter 7 of this Part,

(c) if the individual were employed by the purported umbrella company subsection (2) of section 61Y would apply,

(d) if it did apply accordingly, the contract referred to in subsection (4)(a) of that section would be between the umbrella company and the client, and

(e) the provision of the services by the individual to the client was not as a result of services having been provided to the individual in connection with finding the client with a view to the individual personally providing services to the client—

(i) by the purported umbrella company, or

(ii) where the provision of services to the client is as a result of a series of contracts, by one or more of the parties to those contracts.

(4) Case 3 is that—

(a) a company (“the purported umbrella company”) in which an individual has a material interest, within the meaning given by subsection (5)(a) of section 61Y, participates in arrangements that would, if the company were the umbrella company, result in the umbrella company arrangements conditions being met in relation to services the individual provides to the client,

(b) either—

(i) it is reasonable to suppose that one or more participants in the arrangements, other than the purported umbrella company or the individual, would assume that a substantial proportion of amounts provided to the purported umbrella company in respect of the services will be paid to the individual as earnings, or

(ii) the purported umbrella company has taken any step that it is reasonable to suppose was intended to give the impression to any person (whether or not that impression is given) that a substantial proportion of amounts provided to the purported umbrella company in respect of the services will be paid to the individual as earnings,

(c) it is not the case that a substantial proportion of amounts provided to the purported umbrella company in respect of the services is paid to the individual as earnings, and

(d) subsection (2) of section 61Y would apply if subsection (1)(b)(ii) of that section (requirement that the umbrella company is not a company in which the worker has a material interest) were omitted.

(5) If this subsection applies—

(a) the individual is to be treated for income tax purposes as holding an employment with the purported umbrella company, the duties of which consist of the services the individual provides to the client,

(b) all relevant remuneration is to be treated for income tax purposes as earnings from that employment,

(c) where there is any provision of relevant remuneration (by any person and to any person) that does not result (whether as a direct result of that provision, as a result of the onward provision of that remuneration or otherwise) in the payment of PAYE income of that remuneration, or any part of it, to the individual, the purported umbrella company is treated as making, and the individual is treated as receiving—

(i) a payment of PAYE income in the relevant amount made at the time it was provided for the purposes of the PAYE provisions, and

(ii) a qualifying umbrella company payment made in the relevant amount at that time for the purposes of section 61Y(3),

(d) Chapters 7 to 10 of this Part (deemed employment by intermediaries) do not apply in relation to the provision of those services,

(e) section 863A (deemed employment of partners in limited liability partnerships) of ITTOIA 2005 does not apply so far as it otherwise would apply in relation to the provision of those services, and

(f) accordingly, section 61Y(2) will apply in relation to the purported umbrella company.

(6) For the purposes of subsection (5)—

(a) in paragraph (c) the relevant amount means so much of the remuneration provided as does not result in the payment of PAYE income to the individual, and

(b) that paragraph only applies in relation to the initial provision of an amount of relevant remuneration (and not to any subsequent onward provision of that same amount).

(7) If subsection (5) would, ignoring this subsection, apply in relation to more than one purported umbrella company in relation to services the individual provides to the client, that subsection only applies in relation to the purported umbrella company that—

(a) is a person to whom PAYE regulations apply and is closest to the individual, by reference to the contract or series of contracts resulting in the provision of those services, or

(b) if none of the purported umbrella companies is a person to whom PAYE regulations apply, is closest to the individual by reference to that contract or those contracts.

(8) Where subsection (5) applies and there is a person who is an umbrella company in relation to the services the individual provides to the client, that subsection has effect as if—

(a) paragraph (a) were omitted,

(b) in paragraph (b), the reference to that employment were to the employment of the individual by the umbrella company,

(c) in paragraph (c), the reference to the purported umbrella company were to the umbrella company, and

(d) paragraph (f) were omitted.

(9) Subsection (10) applies where subsection (5) applies and there is more than one person who—

(a) is an umbrella company in relation to services the individual provides to the client, or

(b) is a purported umbrella company in relation to those services (including a purported umbrella company in relation to which subsection (5) does not apply as a result of subsection (7)).

(10) Where this subsection applies, each of the persons falling within paragraphs (a) or (b) of subsection (9) is (to the extent this would not otherwise be the case) jointly and severally liable to pay any amount payable, in accordance with the PAYE provisions, in relation to the relevant remuneration.

(11) For the purposes of this section “relevant remuneration” means—

(a) all remuneration receivable by the individual (from any person) in consequence of providing the services, and

(b) any other amount that it is just and reasonable to attribute to provision of the services by the individual (for example, any amounts that would form part of any deemed direct employment payment or deemed direct payment if any of Chapters 8, 9 or 10 of this Part applied).]

Textual Amendments

F1 Pt. 2 Ch. 11 inserted (with effect in accordance with s. 24(11) of the amending Act) by Finance Act 2026 (c. 11), s. 24(2)(11)