HMRC successful in first Agency Legislation case
11 August 2022
11 August 2022
Read the full case here.
Aspire Comment
This is the first case where we have seen HMRC challenge the failure to correctly apply section 44 ITEPA. Historically, it was always anticipated that section 44 would only be used in the context of payments made to self-employed individuals (sole traders) but in this case the payments were made to personal service companies.
Companies should revisit their engagement of personal service company contractors to ensure that no right of supervision, direction or control exists and that the contractual arrangement is with the company rather than the individual worker.
This case highlights the importance of having accurate contractual documentation in place at all relevant times. Contracts need to reflect the reality of the engagement to prevent risk of being labelled as a “sham”.
The ruling is significant in relation to the application of s44 ITEPA and we may see HMRC utilise this piece of legislation to target more agencies who are engaging people as self-employed but failing to apply tax principles correctly. There are, however, a number of factors in this case which are individual and specific to the circumstances. Most critically, the judgement held that the contractual engagement was with the individual workers rather than their personal service companies (the same contract was used for both scenarios).
If you would like to discuss your engagement of self-employed labour, please contact us at enquire@aspirepartnership.co.uk or alternatively on 0121 445 6178.