ESM8020 - Introduction: key terms for intermediaries legislation (Chapter 8 ITEPA 2003)
Income Tax (Earnings and Pensions) Act 2003, Part 2, Chapter 8
Finance Act 2000, Schedule 12, paragraph 1(1)
Social Security Contributions (Intermediaries) Regulations 2000, regulation 2(1)
Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000, regulation 2(1)
Key terms used in intermediaries legislation and administration are:
Business entity tests - the voluntary tests businesses have previously been able to take to demonstrate whether they were high, medium or low. These were withdrawn with effect from 6 April 2015.
Client - the entity for whom the worker provides their services. This could be any third party in the contractual chain.
Company - means any body corporate or unincorporated association, but not a partnership.
Deemed employment payment/ Worker’s attributable earnings - the amount the intermediary is treated as paying to the worker under the legislation, which is chargeable to income tax as employment income and subject to Class 1 NICs.
”Deemed employment payment” is the term used in the tax legislation, Chapter 8 ITEPA 2003;
“Worker’s attributable earnings” is the term used in the NICs legislation, Social Security Contributions (Intermediaries) Regulations 2000.
For simplicity, where the rest of this section of the ESM refers only to “deemed employment payment” it should also be taken to mean “worker’s attributable earnings” unless stated otherwise.
Example scenarios - the scenarios which were published with the business entity tests to help illustrate when and why the intermediaries legislation and public sector intermediaries legislation applied to an engagement by demonstrating some of the relevant factors. (ESM8055)
Intermediary - the third party through which the worker provides his or her services. An intermediary can be:
- a company (sometimes referred to as a service company or PSC)
- a partnership (including Limited Liability Partnerships)
- an unincorporated association
- an individual.
Relevant engagement – An engagement to which the legislation applies.
Worker - the individual who personally performs the services for the client.