|
| |
|
by the worker in the worker’s personal capacity and not as income of |
| |
| |
| |
(a) | the worker is resident in the United Kingdom, and |
| |
(b) | the relevant services are provided in the United Kingdom, |
| 5 |
| the MSC is treated as having a place of business in the United |
| |
Kingdom, whether or not it in fact does so. |
| |
| |
61H | Relief in case of distributions by managed service company |
| |
(1) | A claim for relief may be made under this section where the MSC— |
| 10 |
| |
(b) | is treated as making a deemed employment payment in any |
| |
| |
(c) | either in that tax year (whether before or after that payment |
| |
is treated as made), or in a subsequent tax year, makes a |
| 15 |
distribution (a “relevant distribution”). |
| |
(2) | A claim for relief under this section must be made— |
| |
(a) | by the MSC by notice to an officer of Revenue and Customs, |
| |
| |
(b) | within 5 years after 31st January following the tax year in |
| 20 |
which the distribution is made. |
| |
(3) | If on a claim being made an officer of Revenue and Customs is |
| |
satisfied that relief should be given in order to avoid a double charge |
| |
to tax, the officer must direct the giving of such relief by way of |
| |
amending any assessment, by discharge or repayment of tax, or |
| 25 |
otherwise, as appears to the officer appropriate. |
| |
(4) | Relief under this section is given by setting the amount of the |
| |
deemed employment payment against the relevant distribution so as |
| |
to reduce the distribution. |
| |
(5) | In the case of more than one relevant distribution, an officer of |
| 30 |
Revenue and Customs must exercise the power conferred by this |
| |
section so as to secure that so far as practicable relief is given by |
| |
setting the amount of a deemed employment payment— |
| |
(a) | against relevant distributions of the same tax year before |
| |
| 35 |
(b) | against relevant distributions received by the worker before |
| |
those received by another person, and |
| |
(c) | against relevant distributions of earlier years before those of |
| |
| |
(6) | Where the amount of a relevant distribution is reduced under this |
| 40 |
section, the amount of any associated tax credit is reduced |
| |
| |
61I | Meaning of “associate” |
| |
(1) | Subsections (2) to (4) apply for the purposes of this Chapter. |
| |
(2) | “Associate”, in relation to an individual, means— |
| 45 |
|
| |
|
| |
|
(a) | a member of the individual’s family or household, |
| |
(b) | a relative of the individual, |
| |
(c) | a partner of the individual, or |
| |
(d) | the trustee of any settlement in relation to which the |
| |
individual, or a relative of the individual or member of the |
| 5 |
individual’s family (living or dead), is or was a settlor. |
| |
(3) | “Associate”, in relation to a company, means a person connected |
| |
| |
(4) | “Associate”, in relation to a partnership, means any associate of a |
| |
member of the partnership. |
| 10 |
| |
(a) | a managed service company (“the MSC”) is a partnership, |
| |
| |
(b) | a person is an associate of another person by virtue only of |
| |
being a member of the partnership, |
| 15 |
| the person is to be treated, for the purposes of this Chapter as it |
| |
applies in relation to the MSC, as if the person were not an associate |
| |
| |
(6) | In subsection (2), “relative” means ancestor, lineal descendant, |
| |
| 20 |
(7) | For the purposes of subsection (2)— |
| |
(a) | a man and woman living together as husband and wife are |
| |
treated as if they were married to each other, and |
| |
(b) | two persons of the same sex living together as if they were |
| |
civil partners of each other are treated as if they were civil |
| 25 |
| |
61J | Interpretation of Chapter |
| |
| |
“associate” has the meaning given by section 61I, |
| |
“business” means any trade, profession or vocation, |
| 30 |
“the client” has the meaning given by section 61D(4), |
| |
“employer’s national insurance contributions” means |
| |
secondary Class 1 or Class 1A national insurance |
| |
| |
“managed service company” has the meaning given by section |
| 35 |
| |
“national insurance contributions” means contributions under |
| |
Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992, |
| |
“PAYE provisions” means the provisions of Part 11 or PAYE |
| |
| 40 |
“the relevant services” has the meaning given by section 61D(4), |
| |
| |
“the worker” has the meaning given by section 61D(4). |
| |
(2) | Nothing in section 995 of ITA 2007 (meaning of control) applies for |
| |
the purposes of this Chapter.” |
| 45 |
5 | In section 218(1) (exclusion of lower-paid employments from parts of |
| |
|
| |
|
| |
|
benefits code: calculation of earnings rate), in Step 1, at the end of paragraph |
| |
| |
(e) | in the case of an employment within section 61G(2) (deemed |
| |
employment payment by managed service company), the |
| |
total amount of deemed employment payments for the year.” |
| 5 |
6 | After section 688 insert— |
| |
“688A | Managed service companies: recovery from other persons |
| |
(1) | PAYE regulations may make provision authorising the recovery |
| |
from a person within subsection (2) of any amount that an officer of |
| |
Revenue and Customs considers should have been deducted by a |
| 10 |
managed service company (“the MSC”) from a payment of, or on |
| |
account of, PAYE income of an individual. |
| |
| |
(a) | a director or other office-holder, or an associate, of the MSC, |
| |
| 15 |
(c) | a person who (directly or indirectly) has encouraged, |
| |
facilitated or otherwise been actively involved in the |
| |
provision by the MSC of the services of the individual, and |
| |
(d) | a director or other office-holder, or an associate, of a person |
| |
(other than an individual) who is within paragraph (b) or (c). |
| 20 |
(3) | A person does not fall within subsection (2)(c) merely by providing |
| |
legal or accountancy advice in a professional capacity. |
| |
(4) | The supplementary provision that may be made by the regulations |
| |
includes provision as to the liability of one person within subsection |
| |
(2) to another such person. |
| 25 |
| |
“associate” has the meaning given by section 61I, |
| |
“director” has the meaning given by section 67, |
| |
“managed service company” has the meaning given by section |
| |
| 30 |
“MSC provider” means an MSC provider who is involved with |
| |
the MSC (within the meaning of section 61B). |
| |
(6) | Section 61C(4) (extended meaning of “associate”) applies for the |
| |
purposes of subsection (2)(d). |
| |
(7) | The Treasury may by order amend this section (but not this |
| 35 |
subsection or subsection (8)). |
| |
(8) | The Treasury must not make an order under subsection (7) unless a |
| |
draft of it has been laid before and approved by a resolution of the |
| |
| |
7 | In section 717(4) (orders and regulations not subject to negative procedure), |
| 40 |
insert at the end “or section 688A(7) (PAYE regulations: managed service |
| |
| |
|
| |
|
| |
|
8 | In Part 2 of Schedule 1 (index of defined expressions), insert at the |
| |
| |
| “associate (in Chapter 9 of Part 2) |
| | | | | | | | | | “business (in Chapter 9 of Part 2) |
| | | 5 | | “the client (in Chapter 9 of Part 2) |
| | | | | “employer’s national insurance |
| | | | | contributions (in Chapter 9 of |
| | | | | | | | | | “managed service company (in |
| | | 10 | | | | | | | “national insurance contributions |
| | | | | | | | | | “PAYE provisions (in Chapter 9 of |
| | | | | | | | 15 | | “the relevant services (in Chapter |
| | | | | | | | | | “the worker (in Chapter 9 of Part |
| | | | | | | | |
|
| 20 |
Calculation of profits of MSCs: deduction for deemed employment payments |
| |
Deduction for deemed employment payments for income tax purposes |
| |
9 | In ITTOIA 2005, after section 164 insert— |
| |
“Managed service companies |
| |
164A | Deduction for deemed employment payments |
| 25 |
(1) | This section applies for the purpose of calculating the profits of a |
| |
trade, profession or vocation carried on by a managed service |
| |
company (“the MSC”) which is treated as making a deemed |
| |
employment payment in connection with the trade, profession or |
| |
| 30 |
(2) | A deduction is allowed for— |
| |
(a) | the amount of the deemed employment payment, and |
| |
(b) | the amount of any employer’s national insurance |
| |
contributions paid by the MSC in respect of it. |
| |
(3) | The deduction is allowed for the period of account in which the |
| 35 |
deemed employment payment is treated as made. |
| |
(4) | The amount of the deduction allowed under subsection (2) is limited |
| |
to the amount that reduces the profits of the firm for the tax year to |
| |
| |
|
| |
|
| |
|
(5) | No deduction in respect of— |
| |
(a) | the deemed employment payment, or |
| |
(b) | any employer’s national insurance contributions paid by the |
| |
| |
| may be made except in accordance with this section. |
| 5 |
(6) | In this section “deemed employment payment”, “employer’s |
| |
national insurance contributions” and “managed service company” |
| |
have the same meaning as in Chapter 9 of Part 2 of ITEPA 2003.” |
| |
Deduction for deemed employment payments for corporation tax purposes |
| |
10 (1) | This paragraph applies for the purpose of calculating for corporation tax |
| 10 |
purposes the profits of a business carried on by a managed service company |
| |
(“the MSC”) which is treated as making a deemed employment payment in |
| |
connection with the business. |
| |
(2) | A deduction is allowed for— |
| |
(a) | the amount of the deemed employment payment, and |
| 15 |
(b) | the amount of any employer’s national insurance contributions paid |
| |
by the MSC in respect of it. |
| |
(3) | The deduction is allowed for the period of account in which the deemed |
| |
employment payment is treated as made. |
| |
(4) | If the MSC is a partnership, the amount of the deduction allowed under sub- |
| 20 |
paragraph (2) is limited to the amount that reduces the profits of the |
| |
partnership for the period of account to nil. |
| |
(5) | No deduction in respect of— |
| |
(a) | the deemed employment payment, or |
| |
(b) | any employer’s national insurance contributions paid by the MSC in |
| 25 |
| |
| may be made except in accordance with this paragraph. |
| |
(6) | In this paragraph “business”, “deemed employment payment”, “employer’s |
| |
national insurance contributions” and “managed service company” have the |
| |
same meanings as in Chapter 9 of Part 2 of ITEPA 2003. |
| 30 |
| |
| |
Restrictions on trade loss relief for partners |
| |
Limit on amount of sideways relief and capital gains relief available in any tax year |
| |
1 (1) | In ITA 2007, before section 104 (and the italic cross-heading before it) |
| |
| 35 |
“Limit on amount of sideways relief and capital gains relief |
| |
103C | Limit on reliefs in any tax year not to exceed cap for tax year |
| |
(1) | This section applies if an individual carries on one or more trades— |
| |
(a) | as a non-active partner in a firm during a tax year, or |
| |
|
| |
|
| |
|
(b) | as a limited partner in a firm at a time in that tax year, |
| |
| and the individual makes a loss in any of those trades (an “affected |
| |
| |
(2) | There is a restriction on the amount of sideways relief and capital |
| |
gains relief which (after applying the restrictions under the other |
| 5 |
provisions of this Chapter) may be given to the individual for any |
| |
affected loss (but see subsections (6) and (7)). |
| |
(3) | The restriction is that the total amount of the sideways relief and |
| |
capital gains relief given to the individual for all the affected losses |
| |
must not exceed the cap for that tax year. |
| 10 |
(4) | The cap for any tax year is £25,000. |
| |
(5) | The Treasury may by order amend the sum for the time being |
| |
specified in subsection (4). |
| |
(6) | The restriction under this section does not apply to so much of any |
| |
affected loss as derives from qualifying film expenditure (see section |
| 15 |
| |
(7) | The restriction under this section does not affect the giving of |
| |
sideways relief for a loss made in a trade against the profits of that |
| |
| |
(8) | In this section “trade” does not include a trade which consists of the |
| 20 |
underwriting business of a member of Lloyd’s (within the meaning |
| |
of section 184 of FA 1993).” |
| |
(2) | The amendment made by sub-paragraph (1) has effect in relation to any loss |
| |
made by an individual in a trade in the tax year 2007-08 or any subsequent |
| |
| 25 |
(3) | But, in the case of a loss made by an individual in a trade in a tax year the |
| |
basis period for which begins before 2nd March 2007 (a “straddling basis |
| |
period”), the amount of that loss for the purposes of section 103C of ITA 2007 |
| |
| |
(a) | the amount of sideways relief and capital gains relief which (after |
| 30 |
applying the restrictions under the other provisions of Chapter 3 of |
| |
Part 4 of that Act) may be given to the individual for that loss, less |
| |
(b) | the amount (if any) of the pre-announcement loss. |
| |
(4) | “The pre-announcement loss” is determined as follows. |
| |
(5) | Calculate the profits or losses of the straddling basis period, but without |
| 35 |
regard to capital allowances and qualifying film expenditure (within the |
| |
meaning of section 103D of ITA 2007). |
| |
(6) | If that calculation produces a loss and the individual has made a |
| |
contribution of an amount as capital to the firm or LLP in question— |
| |
(a) | on or before the start of the straddling basis period, or |
| 40 |
(b) | after the start of that period but before 2nd March 2007, |
| |
| apportion the loss produced by that calculation to the part of the straddling |
| |
basis period which begins with the relevant date and falls before 2nd March |
| |
2007 in proportion to the number of days in that part. |
| |
|
| |
|
| |
|
(7) | Calculate so much of the loss of the straddling basis period as derives from |
| |
relevant pre-announcement capital expenditure. |
| |
(8) | The pre-announcement loss is the sum of— |
| |
(a) | the amount of the loss apportioned under sub-paragraph (6) (if any), |
| |
| 5 |
(b) | so much of the loss of the straddling basis period (if any) as derives |
| |
from relevant pre-announcement capital expenditure. |
| |
(9) | In sub-paragraph (6) “the relevant date” means— |
| |
(a) | in any case where a contribution was made on or before the start of |
| |
the straddling basis period, the start of that period, and |
| 10 |
(b) | in any other case, the date on which the contribution was made or, if |
| |
more than one contribution was made, the date on which the first |
| |
| |
(10) | For the purposes of this paragraph the amount of the loss of the straddling |
| |
basis period that derives from relevant pre-announcement capital |
| 15 |
expenditure is determined on a just and reasonable basis. |
| |
(11) | In this paragraph “relevant pre-announcement capital expenditure” |
| |
| |
(a) | any capital allowance in respect of expenditure paid before 2nd |
| |
| 20 |
(b) | any capital allowance in respect of expenditure paid on or after that |
| |
date pursuant to an unconditional obligation in a contract made |
| |
| |
| and for this purpose “an unconditional obligation” means an obligation |
| |
which may not be varied or extinguished by the exercise of any right |
| 25 |
conferred on the firm or LLP in question (whether or not under the contract). |
| |
(12) | For the purposes of this paragraph— |
| |
(a) | an amount of money is not to be taken as contributed as capital to a |
| |
firm or LLP until the money is paid to the firm or LLP, and |
| |
(b) | a right or other asset is not to be taken as contributed as capital to a |
| 30 |
firm or LLP until it is transferred to the firm or LLP. |
| |
(13) | Section 62 of ITA 2007 (partners: losses of a tax year etc) applies for the |
| |
purposes of this paragraph as it applies for the purposes of Chapter 3 of Part |
| |
| |
Disregard of contributions made for purpose of accessing sideways relief and capital gains relief |
| 35 |
2 (1) | In ITA 2007, before section 114 insert— |
| |
“Exclusion of amounts in calculating contribution to the firm or LLP |
| |
113A | Exclusion of amounts contributed to access relief |
| |
(1) | An amount which an individual contributes to a firm as capital is to |
| |
be excluded in calculating the individual’s contribution to the firm |
| 40 |
for the purposes of section 104 or 110 if the contribution was made |
| |
for a prohibited purpose (but see subsection (4)). |
| |
| |
|
| |
|