The Social Security Contributions (Intermediaries) Regulations 2000

Worker’s attributable earnings—calculation

7.—(1) For the purposes of regulation 6(3)(a) the amount of the worker’s attributable earnings for a tax year is calculated as follows:

• Step One

  Find the total amount of all payments and benefits received by the intermediary in that year under the arrangements, and reduce that amount by 5 per cent.

• Step Two

  Add the amount of any payments and benefits received by the worker in that year under the arrangements, otherwise than from the intermediary, that–

  (a)

  are not chargeable to income tax under Schedule E, and

  (b)

  would be so chargeable if the worker were employed by the client.

• Step Three

  Deduct the amount of any expenses met in that year by the intermediary that under the Taxes Act would have been deductible from the emoluments of the employment if the worker had been employed by the client and the expenses had been met by the worker out of those emoluments.

• Step Four

  Deduct the amount of any capital allowances in respect of expenditure incurred by the intermediary in that year that could have been claimed by the worker under section 27 of the Capital Allowances Act 1990(1) (plant and machinery: extension of allowances to employments etc.) if the worker had been employed by the client and had incurred the expenditure.

• Step Five

  Deduct any contributions made in that year for the benefit of the worker by the intermediary to a scheme approved under Chapter I or Chapter IV of Part XIV of the Taxes Act that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

  This does not apply to excess contributions made and later repaid.

• Step Six

  Deduct the amount of secondary Class 1 contributions and Class 1A contributions paid by the intermediary for that year in respect of earnings of the worker.

• Step Seven

  Deduct–

  (a)

  the amount of any payments made by the intermediary to the worker in that year that constitute remuneration derived from the worker’s employment by that intermediary including, where the intermediary is a body corporate and the worker is a director of that body corporate, payments treated as remuneration derived from that employment by virtue of regulation 17A of the Contributions Regulations(2) (payments to directors to be treated as earnings), but excluding payments which represent items in respect of which a deduction was made under Step Three, and

  (b)

  the amount of any benefits provided by the intermediary to the worker in that year, being benefits that constitute amounts of emoluments in respect of which Class 1A contributions are payable, but excluding any benefits which represent items in respect of which a deduction was made under Step Three.

  If the result at this point is nil or a negative amount, there are no worker’s attributable earnings for that year.

• Step Eight

  Find the amount that, together with the amount of secondary Class 1 contributions payable in respect of it, is equal to the amount resulting from Step Seven (if that amount is a positive amount).

• Step Nine

  The result is the amount of the worker’s attributable earnings for that year.

(2) Where section 559 of the Taxes Act applies (sub-contractors in the construction industry: payments to be made under deduction) the intermediary is treated for the purposes of Step One of the calculation in paragraph (1) as receiving the amount that would have been received had no deduction been made under that section.

(3) For the purpose of calculating the amount of deductible expenses referred to in Step Three of the calculation in paragraph (1) it shall be assumed that all engagements of the worker under the arrangements involving the intermediary are undertaken in the course of the same employment.

(4) For the purposes of this regulation any necessary apportionment shall be made on a just and reasonable basis of amounts received by the intermediary that are referable–

(a) to the services of more than one worker, or

(b) partly to the services of the worker and partly to other matters.

(5) For the purposes of this regulation the time when payments are received by the intermediary or the worker under the arrangements shall be found in accordance with the rules contained in section 202B(3) of the Taxes Act (receipts basis; meaning of receipt) as if the payments made were payments of emoluments, except that subsection (1)(b) of that section (the time when a person becomes entitled to payment of or on account of the emoluments) shall not apply in the period (if any) prior to actual receipt of the payment concerned.

(1)

1990 c. 1; section 27 was amended by section 87(1) and (2) of the Finance Act 1990 (c. 29) and section 50(2) of the Finance Act 1999 (c. 16).

(2)

Regulation 17A was inserted by regulation 5 of S.I. 1983/10.

(3)

Section 202B was inserted by section 37(1) of the Finance Act 1989 (c. 26).