Schedule 12 of the Finance Act 2000

Whilst Schedule 12 of the Finance Act 2000 only deals with income tax, there are similar provisions which relate to National Insurance Contributions which are contained in Regulation 6 of the Social Security Contributions (Intermediaries) Regulations 2000.

Schedule 12 of the Finance Act 2000 states:

Part 1

(1) This Schedule applies where:

• (a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person (“the client”),
• (b) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and
• (c) the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.

(2) In sub-paragraph (1)(a) “business” includes any activity carried on:

• (a) by a government or public or local authority (in the United Kingdom or elsewhere), or
• (b) by a body corporate, unincorporated body or partnership.

(3) The reference in sub-paragraph (1)(b) to a “third party” includes a partnership or unincorporated body of which the worker is a member.

(4) The circumstances referred to in sub-paragraph (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(5) The fact that the worker holds an office with the client does not affect the application of this Schedule.

Part 2

Worker treated as receiving Schedule E income.

(1) If, in the case of an engagement to which this Schedule applies, in any tax year:

• (a) the conditions specified in paragraph 3, 4 or 5 are met in relation to the intermediary, and
• (b) the worker, or an associate of the worker

(i) receives from the intermediary, directly or indirectly, a payment or other benefit that is not chargeable to tax under Schedule E, or

(ii) has rights entitling him, or which in any circumstances would entitle him, to receive from the intermediary, directly or indirectly, any such payment or other benefit, the intermediary is treated as making to the worker in that year, and the worker is treated as receiving in that year, a payment chargeable to income tax under Schedule E (“the deemed Schedule E payment”).

(2) The deemed Schedule E payment is treated as made at the end of the tax year, unless paragraph 12 applies (earlier date of deemed payment in certain cases).

(3) A single payment is treated as made in respect of all engagements in relation to which the intermediary is treated as making a payment to the worker in the tax year. These are referred to in this Schedule as “the relevant engagements” in relation to a deemed Schedule E payment.

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