Corporation Tax Act 2009

Qualifying expenditure on externally provided workers U.K.

1127 “Qualifying expenditure on externally provided workers” U.K.

(1) For the purposes of this Part a company incurs expenditure on externally provided workers if—

(a) it makes a payment (a “staff provision payment”) to another person (the “staff provider”), and

(b) the payment is in respect of the supply to the company, by or through the staff provider, of the services of any externally provided workers.

(2) The company's qualifying expenditure on externally provided workers is determined in accordance with section 1129 or 1131.

(3) In sections 1128 to 1131 references to “staff provider” and “staff provision payment” are to be read in accordance with subsection (1).

Modifications etc. (not altering text)

C1 Ss. 1127-1131 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(e) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

1128 “Externally provided worker” U.K.

(1) For the purposes of this Part a person is an “externally provided worker” in relation to a company if each of conditions A to G is met.

(2) Condition A is that the worker is an individual.

(3) Condition B is that the worker is not a director or employee of the company.

(4) Condition C is that the worker personally provides, or is under an obligation personally to provide, services to the company.

(5) Condition D is that the worker is subject to (or to the right of) supervision, direction or control by the company as to the manner in which those services are provided.

(6) Condition E is that the worker's services are supplied to the company through a staff provider (whether or not the worker is a director or employee of the staff provider or any other person).

(7) Condition F is that the worker provides, or is under an obligation to provide, those services personally to the company under the terms of a contract between the worker and [F1 a person other than the company (the “staff controller”)].

(8) Condition G is that the provision of those services does not constitute the carrying on of activities contracted out by the company.

[F2 (9) In sections 1129 to [F3 1132A] references to “staff controller” are to be read in accordance with subsection (7).]

Textual Amendments

F1 Words in s. 1128(7) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 34(2)

F2 S. 1128(9) inserted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 34(3)

F3 Word in s. 1128(9) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(3), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

Modifications etc. (not altering text)

C1 Ss. 1127-1131 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(e) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

C2 S. 1128 modified by 2010 c. 4, s. 357WBA(3) (as inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 15)

1129 Qualifying expenditure on externally provided workers: connected persons U.K.

(1) This section applies if—

(a) a company makes a staff provision payment,

[F4 (b) the company, the staff provider and (if different) the staff controller (or staff controllers) are all connected, and

(c) in accordance with generally accepted accounting practice—

(i) the whole of the staff provision payment has been brought into account in determining the staff provider's profit or loss for a relevant period, and

(ii) all of the relevant expenditure of each staff controller has been brought into account in determining the staff controller's profit or loss for a relevant period.]

(2) The company's qualifying expenditure on externally provided workers is—

(a) the entire staff provision payment, or

(b) if less, an amount equal to [F5 the aggregate of the relevant expenditure of each staff controller].

(3) “Relevant expenditure”[F6 , in relation to a staff controller,] means expenditure that—

(a) is incurred by the [F7 staff controller] in providing for the company the externally provided workers to whom the staff provision payment relates,

(b) is not of a capital nature, F8 ...

(c) is incurred on staffing costs or agency workers' remuneration[F9 , and

(d) is attributable to qualifying earnings of externally provided workers.]

(4) “Relevant period”[F10 , in relation to a person,] means a period—

(a) for which accounts are drawn up for the [F11 person], and

(b) that ends not more than 12 months after the end of the company's period of account in which the staff provision payment is, in accordance with generally accepted accounting practice, brought into account in determining the company's profit or loss.

[F12 (4A) In subsection (2) the reference to the staff provision payment is to that payment before any deduction is made from the payment under—

(a) section 61S of ITEPA 2003,

(b) regulation 19 of the Social Security Contributions (Intermediaries) Regulations 2000, or

(c) regulation 19 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.]

(5) In section 1123 (meaning of “staffing costs”), which applies for the purpose of determining whether [F13 the expenditure of a staff controller] meets the requirements of subsection (3)(c), references to a company are to be read as references to [F14 a staff controller].

(6) “Agency workers' remuneration”, in the case of any person who is an externally provided worker in relation to the company, means remuneration that—

(a) is receivable by the worker under or in consequence of the contract mentioned in section 1128(7), but

(b) does not constitute employment income of the worker apart from Chapter 7 of Part 2 of ITEPA 2003 (application of provisions to agency workers).

(7) Any apportionment of expenditure of the company or [F15 a staff controller] necessary for the purposes of this section is to be made on a just and reasonable basis.

Textual Amendments

F4 S. 1129(1)(b)(c) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(2)

F5 Words in s. 1129(2)(b) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(3)

F6 Words in s. 1129(3) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(4)(a)

F7 Words in s. 1129(3)(a) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(4)(b)

F8 Word in s. 1129(3) omitted (with effect in relation to accounting periods beginning on or after 1.4.2024) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 9(4)(a), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

F9 S. 1129(3)(d) and word inserted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(4)(b), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

F10 Words in s. 1129(4) inserted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(5)(a)

F11 Words in s. 1129(4)(a) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(5)(b)

F12 S. 1129(4A) inserted (with effect in accordance with Sch. 1 para. 28 of the amending Act) by Finance Act 2020 (c. 14), Sch. 1 para. 23(2) (with Sch. 1 paras. 30-34)

F13 Words in s. 1129(5) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(6)(a)

F14 Words in s. 1129(5) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(6)(b)

F15 Words in s. 1129(7) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 35(7)

Modifications etc. (not altering text)

C1 Ss. 1127-1131 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(e) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

1130 Election for connected persons treatment U.K.

[F16 (1) If—

(a) a company makes a staff provision payment, and

(b) the company, the staff provider and (if different) the staff controller (or staff controllers) are not all connected,

they may jointly elect that section 1129 is to apply to them as if they were all connected.]

(2) Any such election [F17 has effect] in relation to all staff provision payments paid under the same contract or other arrangement.

(3) The election must be made by notice in writing to an officer of Revenue and Customs.

(4) The notice must be given before the end of the period of two years beginning immediately after the end of the company's accounting period in which the contract or other arrangement is entered into.

(5) An election under this section is irrevocable.

Textual Amendments

F16 S. 1130(1) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 36(2)

F17 Words in s. 1130(2) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 36(3)

Modifications etc. (not altering text)

C1 Ss. 1127-1131 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(e) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

1131 Qualifying expenditure on externally provided workers: other cases U.K.

(1) This section applies if—

(a) a company makes a staff provision payment,

[F18 (b) the company, the staff provider and (if different) the staff controller (or staff controllers) are not all connected,] and

(c) no election is made under section 1130.

(2) The company's qualifying expenditure on externally provided workers is [F19 65% of so much of the staff provision payment as is attributable to qualifying earnings of externally provided workers].

[F20 (3) In subsection (2) the reference to the staff provision payment is to that payment before any deduction is made from the payment under—

(a) section 61S of ITEPA 2003,

(b) regulation 19 of the Social Security Contributions (Intermediaries) Regulations 2000, or

(c) regulation 19 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.]

[F21 (4) Any apportionment of expenditure of the company necessary for the purposes of this section is to be made on a just and reasonable basis.]

Textual Amendments

F18 S. 1131(1)(b) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 37

F19 Words in s. 1131(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(5)(a), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

F20 S. 1131(3) inserted (with effect in accordance with Sch. 1 para. 28 of the amending Act) by Finance Act 2020 (c. 14), Sch. 1 para. 23(3) (with Sch. 1 paras. 30-34)

F21 S. 1131(4) inserted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(5)(b), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

Modifications etc. (not altering text)

C1 Ss. 1127-1131 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(e) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

[F22 1131A Sections 1129 and 1131: secondary Class 1 NICS paid by company U.K.

(1) This section applies if—

(a) a company makes a staff provision payment,

(b) the company is treated as making a payment of deemed direct earnings the amount of which is calculated by reference to the amount of the staff provision payment, and

(c) the company pays a secondary Class 1 national insurance contribution in respect of the payment of deemed direct earnings.

(2) In determining the company's qualifying expenditure on externally provided workers in accordance with section 1129(2) or section 1131(2) the amount of the staff payment provision is to be treated as increased by the amount of the contribution.

(3) In determining the company's qualifying expenditure on externally provided workers in accordance with section 1129(2) the aggregate of the relevant expenditure of each staff controller is to be treated as increased by the amount of the contribution.

(4) But subsection (2) does not apply to the extent that the expenditure incurred by the company in paying the contribution is met directly or indirectly by a staff controller.

(5) “A payment of deemed direct earning” means a payment the company is treated as making by reason of regulation 14 of the Social Security Contributions (Intermediaries) Regulations 2000 or regulation 14 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.]

Textual Amendments

F22 S. 1131A inserted (with effect in accordance with Sch. 1 para. 28 of the amending Act) by Finance Act 2020 (c. 14), Sch. 1 para. 23(4) (with Sch. 1 paras. 30-34)

1132 External workers: attributable expenditure U.K.

(1) This section applies for the purposes of this Part to identify when qualifying expenditure on externally provided workers is attributable to relevant research and development.

(2) Qualifying expenditure on externally provided workers is so attributable if the workers are directly and actively engaged in relevant research and development.

(3) Subsection (4) applies if an externally provided worker is partly engaged directly and actively in relevant research and development.

(4) The appropriate proportion of the qualifying expenditure relating to the worker is treated as attributable to relevant research and development.

(5) Subsection (6) applies if persons provide services (such as secretarial or administrative services) in support of activities carried on by others.

(6) Those persons are not, as a result of providing those services, to be treated as themselves directly and actively engaged in those activities.

Modifications etc. (not altering text)

C3 S. 1132 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(f) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

[F23 1132A “Qualifying earnings” U.K.

(1) This section determines what are “qualifying earnings” in relation to an externally provided worker for the purposes of this Part.

(2) The worker’s earnings are qualifying earnings if either—

(a) the staff controller, or

(b) the company in relation to which the worker is an externally provided worker,

is, in respect of any part of those earnings, required to account to an officer of Revenue and Customs both for income tax under PAYE regulations and for Class 1 national insurance contributions.

(3) If subsection (2) does not apply, the worker’s earnings are qualifying earnings if and to the extent that they are attributable to relevant research and development that is undertaken outside the United Kingdom and to which section 1138A applies.

(4) In this section, “the worker’s earnings” means the worker’s earnings under the contract mentioned in section 1128(7).]

Textual Amendments

F23 S. 1132A inserted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(6), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2