Section 61Y — Income Tax (Earnings and Pensions) Act 2003: Umbrella companies: joint and several liability

Umbrella companies: joint and several liability 61Y 1 Subsection (2) applies if—

a an individual (“the worker”) personally provides services, or enters into arrangements with a view to personally providing services, to another person (“ the client ”),

b the worker is employed by a third person (“the umbrella company”)—

i that carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour, and ii that is not a company in which the worker has a material interest, and c the umbrella company arrangements conditions are met.

2 Each relevant party (see section 61Z) is, along with the umbrella company, jointly and severally liable to pay any amount payable, in accordance with the PAYE provisions, by the umbrella company in relation to a qualifying umbrella company payment.

3 A “ qualifying umbrella company payment ” means a payment made in respect of the employment of the worker to the extent that it is not in respect of the provision of services to a person other than the client.

4 The umbrella company arrangements conditions are that—

a there is a contract between the umbrella company and—

i the client, or ii another person, b under or in consequence of the contract—

i the services are provided, or ii the umbrella company is paid, or otherwise provided with consideration, for the services, and c if the contract is not between the umbrella company and the client—

i there is a contract between the client and another person, ii the provision of the services or of payment or other consideration for the services is also a consequence of that other contract (whether directly or as a result of a series of contracts involving other persons).

5 For the purposes of subsection (1)(b)(ii)—

a “ material interest ”, in relation to a company, means—

i beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company, ii possession of, or entitlement to acquire, rights entitling the holder to receive more than 5% of any distributions that may be made by the company, or iii where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5% of the assets that would then be available for distribution among the participators, but b the worker is to be regarded as not having a material interest in a company if that interest is a result, to any extent, of any arrangements the main purpose, or one of the main purposes, of which is to secure that subsection (2) does not apply.

6 And for the purposes of subsection (5)(a) “ participator ” has the meaning given by section 454 of CTA 2010.

7 In this Chapter— “ arrangements ” include any agreement, understanding, scheme transaction or series of transactions (whether or not legally enforceable); “ the client ”, “ the umbrella company ” and “ the worker ” are to be construed in accordance with subsection (1); “ employed ”, in relation to an individual, does not include the individual being treated as employed as a result of any of— Chapters 7 to 10 of this Part (deemed employment by intermediaries), or section 863A of ITTOIA 2005 (deemed employment of partners in limited liability partnerships), and “ employer ” is to be construed accordingly; “ PAYE provisions ” means the provisions of Part 11 or PAYE regulations; “ the umbrella company arrangements conditions ” means the conditions set out in subsection (4).