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HMRC Expects Due Diligence

Hudson Contract | 20th October 2016


Jolyon Maugham QC (Specialist tax barrister)


Video Transcript 

Jolyon Maugham - 

If you impose an intermediary between the worker and engager before the onshore employment intermediaries provisions you could transform the nature of the relationships between the worker and engager.  To counter that government introduced the onshore employment intermediaries provision which they substitute for the normal employment law test.

The question whether the individual is supervised, directed or controlled by the ultimate engager that is the government’s attempt to restore the situation where the tax relief, the lower tax burden only foes to those who looked at are self-employed. The consequences of the onshore employment intermediaries provision is that money agencies many intermediaries who were in the business of transforming the relationship engaging and working through the interposition of an intermediary find themselves without a business model. Some of them have responded to that situation by trying to create a picture of reality so if you’re a proper subcontractor the antrum employments provision doesn’t apply to you and so what many of the agencies have done is they’ve sought to portray themselves as proper subcontractors without actually being proper subcontractors.

They continue in their role as in effect payroll agencies but they pretend to be proper subcontractors and it’s pretty clear to me that that pretence does not work. If you are engaging and you are offered a contract by an intermediary you would question whether that contract actually reflects commercial reality if it doesn’t reflect commercial reality you may well find that you are exposed to tax risk the risk of individuals who engage in the contract being characterised by the revenue as being engaged directly by you and by being employed.