s61M(1)(d) states:
the circumstances are such that—
(i) if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client
This is the section that hypothesizes on the relationship between a "worker" and an end-client if the PSC did not exist. We have all seen the gov statement that it "wishes to level the playing field as it is unfair that some people pay much less tax for doing essentially the same job as a similar employee". What the gov conveniently ignores is that it is not the same "job" at all. The extent of risk involved on the PSC side is actually so much greater that it is embarrassing for the gov to make such a statement. We have the obvious differences such as pension, holiday pay, employment rights etc but the main difference is the assumption of contract performance risk.
PSC contracts typically assume financial risks in the event of non-performance, direct compensation or rectification costs to be borne by the PSC. If the PSC is "stripped away" then which rights and obligations remain? The rights and obligations remain as per the original contract but are now incumbent upon you as a sole-trader which means all your personal assets are on the line. Compare this to the risk of being an employee.
For all properly constructed PSC company's the answer to the question posed by the legislation is that the relationship remains either one of a business to business relationship on a sole-trader basis, (for which business expenses such as travel, accommodation and subsistence are allowed), or no relationship exists at all as you would never accept the risks being imposed under such a hypothetical situation.
To simply look at working practices while conveniently ignoring which party carries the risk of contract performance may be a fatal mistake in law.
the circumstances are such that—
(i) if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client
This is the section that hypothesizes on the relationship between a "worker" and an end-client if the PSC did not exist. We have all seen the gov statement that it "wishes to level the playing field as it is unfair that some people pay much less tax for doing essentially the same job as a similar employee". What the gov conveniently ignores is that it is not the same "job" at all. The extent of risk involved on the PSC side is actually so much greater that it is embarrassing for the gov to make such a statement. We have the obvious differences such as pension, holiday pay, employment rights etc but the main difference is the assumption of contract performance risk.
PSC contracts typically assume financial risks in the event of non-performance, direct compensation or rectification costs to be borne by the PSC. If the PSC is "stripped away" then which rights and obligations remain? The rights and obligations remain as per the original contract but are now incumbent upon you as a sole-trader which means all your personal assets are on the line. Compare this to the risk of being an employee.
For all properly constructed PSC company's the answer to the question posed by the legislation is that the relationship remains either one of a business to business relationship on a sole-trader basis, (for which business expenses such as travel, accommodation and subsistence are allowed), or no relationship exists at all as you would never accept the risks being imposed under such a hypothetical situation.
To simply look at working practices while conveniently ignoring which party carries the risk of contract performance may be a fatal mistake in law.
Comment