PART 1

Income tax, corporation tax and capital gains tax

Employment income

Workers’ services provided through intermediaries
21
1
Chapter 10 of Part 2 of ITEPA 2003 (workers’ services provided through intermediaries to public authorities or medium or large clients) is amended as follows.
2
In section 61N (worker treated as receiving earnings from employment)—
a
in subsection (3), for “and 61V” substitute “, 61V and 61WA”;
b
in subsection (5), for “section 61V” substitute “sections 61V and 61WA”;
c
in subsection (5A), in the words before paragraph (a), for “and 61V” substitute “, 61V and 61WA”.
3
In section 61O (conditions where intermediary is a company)—
a
in subsection (1), for paragraph (b) substitute—
b
subsection (1A) or (1B) is satisfied.
;
b
after subsection (1) insert—
1A
This subsection is satisfied where the worker has a material interest in the intermediary.
1B
This subsection is satisfied where—
a
the worker has a non-material interest in the intermediary,
b
the worker—
i
has received,
ii
has rights which entitle, or which in any circumstances would entitle, the worker to receive, or
iii
expects to receive,
a chain payment from the intermediary, and
c
the chain payment does not, or will not, wholly constitute employment income of the worker (apart from as a result of this Chapter).
;
c
after subsection (4) insert—
4A
The worker is treated as having a non-material interest in the intermediary if—
a
the worker, alone or with one or more associates of the worker, or
b
an associate of the worker, with or without other associates of the worker,
has a non-material interest in the intermediary.
4B
For this purpose a non-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, 5% or less of the ordinary share capital of the company,
b
possession of, or entitlement to acquire, rights entitling the holder to receive 5% or less 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 5% or less of the assets that would then be available for distribution among the participators.
4C
In subsection (4B)(c) “participator” has the meaning given by section 454 of CTA 2010.
4
In section 61S(4) (deductions from chain payments), for “services-provider” substitute “relevant person”.
5
In section 61T(3) (client-led status disagreement process), for “section 61V” substitute “sections 61V and 61WA”.
6
In section 61U (information to be provided by worker and consequences of failure)—
a
in the heading, after “worker” insert “or intermediary”;
b
in subsection (1), for “the worker” substitute “the relevant person”;
c
in subsection (2), for “the worker” substitute “the relevant person”;
d
in subsection (3), after “In this section” insert
—
- “relevant person” means the worker or, in a case where the worker has not complied with subsection (1), the intermediary;
.
7
In section 61V (consequences of providing fraudulent information)—
a
in subsection (2), in the words before paragraph (a), for “services-provider” substitute “relevant person (or if more than one, the first relevant person) in relation to whom the fraudulent documentation condition is met”;
b
in subsection (3), for “involves the services-provider” substitute “may involve a services-provider”;
c
in subsection (5), after paragraph (c) insert—
d
a person in the chain who is resident in the United Kingdom or has a place of business in the United Kingdom.
8
After section 61W insert—

Anti-avoidance
61WA
1
This section applies if in any case at least one relevant person in a chain participates in a relevant avoidance arrangement.
2
An arrangement is a “relevant avoidance arrangement” if its main purpose, or one of its main purposes, is to secure a tax advantage by securing that at least one of the conditions mentioned in section 61O or 61P is not met in relation to an intermediary.
3
Section 61N(3) has effect as if the reference to the fee-payer were a reference to the participating person, but—
a
section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and
b
Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.
4
The participating person is—
a
in a case where only one relevant person participates in the arrangement, that person;
b
in any other case the highest relevant person in the chain who participated in the arrangement and from whom HMRC considers there is a realistic prospect of recovering, within a reasonable period, the amount of tax that would have been paid (or not repaid) in the absence of the arrangement.
5
Subsection (3) has effect even though that may involve a participating person being treated as both employer and employee in relation to the deemed employment under section 61N(3).
6
In this section—
- “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
- “deemed employer” means a person who would, but for this section, be treated by section 61N(3) as making a payment to the worker;
- “relevant person” means—
  1. the worker;
  2. a person who is resident in the United Kingdom or who has a place of business in the United Kingdom;
- “tax” means income tax (and “tax advantage” is to be construed accordingly”);
- “tax advantage” includes—
  1. avoidance or reduction of a charge to tax or an assessment to tax,
  2. repayment or increased repayment of tax,
  3. avoidance of a possible assessment to tax, and
  4. deferral of a payment of tax or advancement of a repayment of tax.
9
In section 688AA(2)(a) (workers’ services provided through intermediaries: recovery of PAYE), after “to a worker” insert “(other than by virtue of section 61WA)”.
10
The amendments made by this section have effect in relation to deemed direct payments treated as made on or after 6 April 2021.