The tax man lifts the corporate veil
The provision of services through an individual’s personal services company continues to be under scrutiny by HMRC.
A tax tribunal recently held that a television journalist who provided her services to a broadcaster through a personal services company had the status of an employee for tax purposes. As a result, the personal services company was required to account for PAYE and NICs on all of the fees it received under the agreement with the broadcaster, not just that element of them that it paid over to the individual as salary.
The tribunal noted that it was the broadcaster who was able to control how the individual performed her services and to decide what other work she could undertake. She was obliged to make herself available to the broadcaster for 225 days a year. These and other factors indicated, the tribunal said, that the relationship between the broadcaster and the individual was similar to full-time employment and that she should be treated as having the status of an employee for tax purposes, notwithstanding the interposition of the personal services company. The fact that the broadcaster accounted for 95% of the revenue of the personal services company supported this view.
The tax status depends on the facts in each case, but this reminds us that setting up these consultancy type arrangements using a personal services company is not guaranteed to set up a tax status other than as an employee.
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