Agency worker tax rules, PSCs and IR35

In this Tax Journal article, Frances Lewis and Matthew Greene of Osborne Clarke's Workforce Solutions sector, look at a recent case involving tax assessments raised under the agency worker tax legislation (s.44 Income Tax (earnings and Pensions) Act 2003) (ITEPA) and at the importance of ensuring that contracts are issued in the names of the correct parties. Although not the main point tested, the case acts as a reminder that the agency worker tax legislation can apply even where there is a personal service company involved in the supply – there is no obligation on HMRC to apply IR35 before looking at s.44 ITEPA. Following the announcement to repeal IR35 from April 2023, industry reports suggest that a large number of contractors are likely to move back into personal service company (PSC) contracting. Staffing suppliers at the top of supply chains should consider whether widescale re-adoption of PSC contracting could pose a risk under the agency worker tax legislation, particularly if allowed to happen where contractors are subject to (or to the right of) supervision, direction or control as to the manner in which they work. So-called SDC (supervision, direction and control) checks are likely to become more important.

Read the full article here.

This article first appeared in Tax Journal.