IEIM721080 - Employees

Regulation 12 provides that where an individual is an employee and takes actions which would bring them within the definition of intermediary, the employee is not treated as being an intermediary. This only applies where the employer, or another firm connected with the employer, is the intermediary instead.

Employee and employer have the meaning given by section 4 of the Income Tax (Earnings and Pensions) Act 2003 (regulation 12(2)).

An employer is connected to another person (which includes legal and natural persons) for the purposes of regulation 12 if they are closely bound by financial economic or organisational links. While the question of whether two people are ‘closely bound’ by such links will always depend on the facts of the case, as a minimum, companies in the same group for the purposes of any relevant provisions of the Taxes Acts will virtually always meet this definition.

For example, an individual, K, is employed by an employment company, T, within a group of companies which provide consultancy services. As part of her employment, K advises a client on an arrangement which would be reportable under the Regulations. T is not an intermediary because its only activity is employing employees of the group. However, company W, another company within the group, does meet the definition of intermediary because it provides assistance in respect of a reportable arrangement. Under regulation 12(4) T and W are connected because they are closely bound by economic and organisational links (in this case because they are part of the same group). As such, under regulation 12(3), K is treated for the purposes of that regulation as being an employee of W as well as of T. K is therefore treated as being an employee of an intermediary (W) and so the exemption in regulation 12(1) applies. The same treatment would apply where a person is an employee of a limited liability partnership (LLP) which is connected with the LLP which actually acts as an intermediary. This could be the case in a professional services firm where employees are employed by a separate LLP, where one LLP is a member of the other.