Employment Income: Scope |
13 |
subject to PAYE and NICs—subject to a deduction not only for sums actually paid as emlpoyment income to E but also certain expenses such as pension contributions and a 5% general deduction.71 The rules extend also to other benefits and not just to payments. Usually the worker must have a material interest in the company but the legislation is not confined to that situation.72 |
Among the many practical problems is the need to distinguish relevant engagements from other engagements (since PSC may well tell E to work for other people during the year) with all the apportionment problems which ensue. This is compounded by the need to do so rapidly since the PSC must pay the tax very shortly after the end of the year.73 The Act contains rules for dealing with any distributions by the intermediary during the year; it also makes provision for multiple intermediaries.74 The intermediary may be an individual or partnership as well as a company.75 However a trust intermediary does not appear to be caught. |
The rules do not apply where E works for a company which is an associated company of the client.76 They do not affect the operation of TA 1988, section 134 (workers supplied by agencies).77 |
Minor amendments are made to the IR 35 legislation by FA 2002. These affect the treatment of reimbursed expenses and mileage allowances and are designed to ensure that the deductibility of these expenses is not lost because of the use of an intermediary. They now form part of ITEPA section 54(3); originally FA 2000 schedule 12, paras 7A and 7B added by FA 2002 section 38. A further change ensures that corporation tax relief for deductible expenses is not lost just because the company ceases to trade; this is a fascinating example of the importance of the technicalities of timing rules. |
13A.2.3.2 Consequences |
The consequences of coming within schedule E as opposed to schedule D, case I or II are extensive, and rest on the doctrine that the schedules are mutually exclusive. In IRC v Brander and Cruickshank,78 Lord Donovan said |