ESM3033 - Basic principles: how to
work out when the legislation applies - example
This section provides an example of a situation in which the
intermediaries legislation would apply.
Mr A is a computer programmer. He negotiates a contract with
the information technology department of a large financial
institution, Client plc. Under this contract, which will last for
12 months starting on 1 May 2000, he is engaged on terms and
conditions that would make him an employee of the financial
institution if taken on directly. However, having negotiated the
terms of the contract, the agreement for the supply of Mr A’s
services is made between Client plc and Mr A’s company, A
Services Ltd, in which he owns all of the shares. There is no
contract between Mr A and Client plc.
All of the income from the contract with the financial
institution will be covered by the intermediaries legislation.
- Mr A (the worker) is under an obligation
to personally perform services for the purposes of a business
carried on by another person, Client plc (the client)
- the services are provided not under a
contract directly between the client and the worker but under
arrangements involving a third party, A Services Ltd (the
- if the services had been provided under a
contract directly between Mr A and Client plc, he would be regarded
as an employee of the client for tax and NICs purposes
- the work done under the contract starts
after 6 April 2000.
- Mr A owns shares in the intermediary and
is entitled to receive dividends from the company. He therefore has
rights entitling him to receive a payment from the intermediary
that is not chargeable to tax under Schedule E/is not employment
- Mr A owns all of the shares in the
intermediary. He therefore has a material interest in the
intermediary and thus the conditions of liability where the
intermediary is a company are satisfied (see
Therefore a deemed payment will be treated as paid.