(This note is not part of the Regulations)
These Regulations make amendments to 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 Northern Ireland Regulations”) to make provision about social security contributions payable in relation to employed earner's employment where services are provided through an intermediary to public authority clients, small and medium or large clients. Earnings from workers' services provided through intermediaries where the client is a medium or large organisation which is not a public authority are treated the same as earnings from workers' services provided through intermediaries where the client is a public authority. Consequential amendments are also made to the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) (“the Contributions Regulations”) and the Social Security Contributions (Managed Service Companies) Regulations 2007 (SI. 2007/2070). The amendments reflect new provisions inserted into Chapters 8 and 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (“ITEPA 2003”) and the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682).
Regulation 1 provides for citation, commencement, effect and interpretation.
Regulation 2 amends the Intermediaries Regulations and the Northern Ireland Regulations respectively as follows—
— Regulation 2(3) amends the scope of the definition of “public authority” in regulation 3A, which applies for the purposes of both Part 1 and Part 2.
— Regulation 2(4) inserts new regulation 5A which defines for the purposes of Part 1 when a client qualifies as small by reference to sections 60A to 60G of ITEPA 2003. It also defines when a person has a UK connection. It also inserts new regulation 5B which places a duty on the client to state whether it qualifies as small for a tax year upon request, and imposes a time limit after which the request is enforceable by court order.
— Regulation 2(5) amends regulation 6 to apply Part 1 to the provision of workers' services through intermediaries to clients, other than public authorities, who qualify as small or do not have a UK connection. It also excludes engagements with a client who is an individual if the services are not performed in connection with that individual's business.
— Regulation 2(6) makes a minor correction to regulation 9(2).
— Regulation 2(7) amends regulation 12 to provide that Part 1 does not apply if the Social Security Contributions (Managed Service Companies) Regulations 2007 (S.I. 2007/2070) apply to services provided by a managed service company.
— Regulation 2(8) updates the heading of Part 2 to reflect its extended application to clients qualifying as medium or large as well as public authorities. It also inserts new regulation 12A which defines for the purposes of Part 2 when a client qualifies as medium or large and when a person has a UK connection.
— Regulation 2(9) amends regulation 13 to extend Part 2 to apply to the provision of workers' services through intermediaries who qualify as medium or large and have a UK connection, in addition to public authorities (of any size). It also excludes engagements with a client who is an individual and the services are not performed in connection with that individual's trade or business.
— Regulation 2(10) amends regulation 14 to make the client the “deemed employer” until such time that it passes on a status determination statement to the worker and the party the client contracts with. It amends the definition of “qualifying person” and makes the last person in the chain to receive a status determination statement the deemed employer for the purposes of paragraphs (3) and (4). It only treats a chain payment as deemed direct earnings where the client qualifies as medium or large (not small) and has a UK connection for the tax year in which it is made.
— Regulation 2(11) inserts new regulation 14A providing for the meaning of “status determination statement”. A status determination statement must state the client's status determination with respect to that engagement and the reasons for reaching that conclusion, even if the client's conclusion turns out to be incorrect. However, if the client fails to take reasonable care in coming to that conclusion, the statement is not a status determination statement.
— Regulation 2(12) amends regulation 15(1) to amend the conditions to be met by a company for the purposes of regulation 14(1).
— Regulation 2(13) omits a provision superseded by regulation 2(5) of the Intermediaries Regulations and the Northern Ireland Regulations.
— Regulation 2(14) substitutes new regulations 20 and 20A for regulation 20. New regulation 20 sets out a client-led status disagreement process under which the worker or deemed employer may, during the course of an engagement to which Part 2 applies and before the final chain payment is made, make representations to the client that the conclusion in the status determination statement is incorrect. The client must give a statement to the worker or deemed employer stating either that the conclusion is correct, giving reasons, or a new status determination statement containing a different conclusion, the reasons for it, and a withdrawal of the previous status determination statement. Failure to provide a statement or new status determination statement (and withdrawal of the previous one) within 45 days of receiving the representations results in regulation 14(3) and (4) having effect to make the client the deemed employer until the duty is complied with, but subject to the fraudulent documentation condition in regulation 22. For the purposes of the “qualifying person” definition in new regulation 14(8)(za), a new status determination given to the deemed employer is treated as having been given to the deemed employer by the person immediately above them in the chain.
— Regulation 2(15) amends regulation 23(1) on prevention of double liability to National Insurance contributions in consequence of Part 2 now applying to clients who qualify as medium and large in addition to public authorities.
Regulation 3 amends the Contributions Regulations by making corrections in Part 2 of, and inserting new Part 3AA into, Schedule 4. New Part 3AA provides for recovery of National Insurance contributions debts arising under Part 2 of the Intermediaries Regulations and Part 2 of the Northern Ireland Regulations from a person other than the person treated as making a payment of earnings from an employment to a worker by virtue of regulation 14(3) of the Intermediaries Regulations and regulation 14(3) of the Northern Ireland Regulations.
— Paragraph 29LA enables an officer of Revenue and Customs to recover a “deemed employer NICs debt” from a “relevant person” where the officer considers there is no realistic prospect of recovery within a reasonable period from the person liable for the debt by virtue of Part 2 of the Intermediaries Regulations. The paragraph also specifies the order in which debts may be pursued from relevant persons.
— Paragraph 29LB sets out the circumstances in which a deemed employer NICs debt may not be recovered.
— Paragraph 29LC defines the “relevant period” during which a recovery notice may be given.
— Paragraph 29LD specifies the contents of the recovery notice.
— Paragraph 29LE specifies the deadline for paying a deemed employer NICs debt and the time from which that person is liable to pay any interest accruing on that amount.
— Paragraph 29LF specifies the grounds for appeal against a recovery notice, the time limits for appeal and the determinations that may be made by a tribunal.
— Paragraph 29LG specifies the circumstances in which a recovery notice may be withdrawn.
— Paragraph 29LH provides for recovery of a deemed employer NICs debt in accordance with Part 6 of the Taxes Management Act 1970 (c. 9).
Regulation 4 amends the Social Security Contributions (Managed Service Companies) Regulations 2007 so that they do not apply if Part 2 of the Intermediaries Regulations applies.
Regulation 5 contains transitional provisions in relation to services provided before 6th April 2021 but paid for on or after that date and in relation to status determination statements given and representations made to the client before 6th April 2021.
A Tax Information and Impact Note covering this instrument was published on 11 July 2019 alongside draft legislation on the reform of the off-payroll working rules and is available on the website at: https://www.gov.uk/government/publications/rules-for-off-payroll-working-from-april-2020. Due to the delay to the implementation of the reform, an updated Tax Information and Impact Note will be published at the next fiscal event.