Workers provided excluded services

The taxpayer supplied workers for consultancies including BGM who was a major customer. It provided consultancy services to a bank and used the workers from the taxpayer to carry out this work.

The taxpayer accounted for PAYE and National insurance on the workers’ pay and recharged the cost to the consultancies with commission. It was agreed that the workers were not employees of the taxpayer.

The taxpayer and BGM both considered that the individuals were working for BGM and not the bank. The taxpayer acted as introducer and BGM was responsible for directing and controlling the workers. However BGM went into administration which led the taxpayer to reconsider the workers’ statuses. It decided that the workers were providing ‘excluded services’ (ITEPA 2003 s 47(2)(b)) so the agency legislation did not apply and it was not obliged to operate PAYE or pay class 1 National Insurance.

Section 47 states that...