ESM10016 - off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: duty for client to withdraw SDS if it ceases to be medium or large

Section 61TA Chapter 10, Part 2 ITEPA 2003

Regulation 20A Social Security Contributions (Intermediaries) Regulations 2000

Where a client that has provided a Status Determination Statement (SDS) no longer qualifies as medium or large-sized (see ESM10006) for the coming tax year, it must provide a further statement to the worker and deemed employer (where applicable). This must be done prior to the beginning of that tax year stating that it no longer qualifies as medium or large-sized and confirm that the SDS is withdrawn from the start of the next tax year.

Payments made in the period prior to the client ceasing to be medium or large will still be subject to Chapter 10, Part 2 ITEPA 2003. Payments made after the start of the next year, even if services were provided before the start of that tax year, will no longer be considered by the rules as the non-public sector client is now classed as small.

Workers providing their services through an intermediary for that client will have to consider whether the intermediaries legislation at Chapter 8, Part 2 ITEPA 2003 applies (see ESM8000) for any payments made in the next tax year.

If the client fails to inform the worker and deemed employer that it is now small prior to the beginning of the tax year, it will be treated as medium or large-sized for the coming tax year for that engagement. The client will have the responsibility for the deduction of tax and NICs and payment of apprenticeship levy and paying these to HMRC in respect of that worker.

EXAMPLE

Construction Ltd is a medium-sized entity for the 2021/22 tax year. Throughout the 2021/22 tax year Construction Ltd made status determinations and issued a SDS to any worker providing their services through an intermediary. Construction Ltd will be considered small for the 2022/23 tax year. Construction Ltd issues a statement on 31 January 2022 to the workers and deemed employers stating it will no longer qualify as medium and any SDS issued to workers for 2021/22 is withdrawn from the start of 2022/23. As Construction Ltd has provided the statement before the start of the 2022/23 tax year, it does not have to consider Chapter 10, Part 2 ITEPA 2003 for the tax year 2022/23. The workers should consider whether Chapter 8, Part 2 ITEPA 2003 applies for that tax year.