IR has published the draft clauses for its provisions on personal service companies. These are when a worker supplies his services through an intermediary, such as a company he owns, rather than directly as an employee. The government sees this as tax avoidance. From April 2000, a personal service company is liable to an additional PAYE and class 1 national insurance charge for amounts of retained profit.
Inland Revenue has given details on the specific contracts used by consultants in the computer industry. Under these contracts, the consultant is required to:
- work where the client requests;
- work an agreed number of hours each week;
- work for an agreed rate of pay;
- keep a timesheet;
- be subject to the client’s direction;
- not subcontract his work to anyone else.
Inland Revenue states that such where such a contract lasts for a month or more, the worker will be regarded as an employee unless the worker has a recent history of work which is self-employment. For contracts of less than one month, Inland Revenue will determine the matter on the facts of each case. If the contract is regarded as of employment but the worker is employed through a personal service company, that personal service company is liable to the additional PAYE and class 1 national insurance charge. The employer plays no part in determining this matter; he continues paying the invoices from the personal service company as before.
Guidance have been given by Inland Revenue on when they regard a worker as being self-employed for these purposes. This guidance was summarised in Boardroom Briefing 148. It follows that already published in free booklet IR 35.
If there is still difficulty in determining employment status for an individual, Inland Revenue will give a ruling. Such a request must be made in writing to IR 35, Penhaligon House, Trinity Street, St Austell, Cornwall PL25 5BA. It may be faxed to 0845 302 3535. A copy of the contract must be sent with the request. Employees who work in the film industry or television, should write “film” or “TV” instead of the postcode. Inland Revenue will also be setting up an e-mail facility.
[2000]