12(1)If in any tax year—
(a)a deemed Schedule E payment is treated as made, and
(b)before the date on which the payment would be treated as made under paragraph 2(2) any relevant event (as defined below) occurs in relation to the intermediary,
the deemed Schedule E payment for that year is treated as having been made immediately before that event or, if there is more than one, immediately before the first of them.
(2)Where the intermediary is a company the following are relevant events—
(a)where the worker is a member of the company, his ceasing to be such a member;
(b)where the worker holds an office with the company, his ceasing to hold such an office;
(c)where the worker is employed by the company, his ceasing to be so employed.
(3)Where the intermediary is a partnership the following are relevant events—
(a)the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such;
(b)where the worker is employed by the partnership, his ceasing to be so employed.
(4)Where the intermediary is an individual and the worker is employed by him, it is a relevant event if the worker ceases to be so employed.
(5)The fact that the deemed Schedule E payment is treated as made before the end of the tax year does not affect what receipts and other matters are taken into account in calculating its amount.
13(1)A claim for relief may be made under this paragraph where the intermediary—
(a)is a company,
(b)is treated as making a deemed Schedule E payment in any tax year, and
(c)either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution.
(2)A claim for relief under this paragraph must be made by the intermediary by notice in writing given to the Inland Revenue.
(3)If on a claim being made the Inland Revenue are satisfied that relief should be given in order to avoid a double charge to tax, they shall give such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to them appropriate.
(4)Relief under this paragraph shall be given by treating the amount of the distribution as reduced, not the amount of the deemed Schedule E payment.
(5)The Inland Revenue shall exercise the power conferred by this paragraph so as to secure that so far as practicable relief is given by setting the amount of a deemed Schedule E payment—
(a)against relevant distributions of the same tax year before those of other years,
(b)against relevant distributions received by the worker before those received by another person, and
(c)against relevant distributions of earlier years before those of later years.
(6)Where the amount of a distribution is reduced under this paragraph, the amount of any associated tax credit is reduced accordingly.
14(1)The following provisions apply where in the case of an engagement to which this Schedule applies the arrangements involve more than one relevant intermediary—
paragraph 15 (avoidance of double-counting);
paragraph 16 (joint and several liability for PAYE deductions)
(2)In this paragraph and paragraphs 15 and 16 “relevant intermediary” means an intermediary in relation to which the conditions specified in paragraph 3, 4 or 5 are met.
(3)Except as provided by paragraphs 15 and 16, the provisions of this Schedule apply separately in relation to each relevant intermediary.
15(1)This paragraph applies where a payment or other benefit has been made or provided, directly or indirectly, from one relevant intermediary to another in respect of the engagement.
(2)In that case, the amount taken into account in relation to any intermediary in Step One or Step Two of the calculation in paragraph 7 shall be reduced to such extent as is necessary to avoid double-counting having regard to the amount so taken into account in relation to any other intermediary.
16(1)All relevant intermediaries in relation to an engagement to which this Schedule applies are jointly and severally liable, subject to sub-paragraph (2), to account for any amount required under the PAYE provisions to be deducted from a deemed Schedule E payment treated as made by any of them—
(a)in respect of that engagement, or
(b)in respect of that engagement together with other engagements.
(2)An intermediary is not so liable if it has not received any payment or benefit in respect of that engagement or any such other engagement as is mentioned in sub-paragraph (1)(b).
17(1)In calculating for tax purposes the profits of a business carried on by an intermediary that is treated as making in connection with that business a deemed Schedule E payment, a deduction is allowed for—
(a)the amount of the payment, and
(b)the amount of any employer’s national insurance contributions paid by the intermediary in respect of it.
(2)The deduction allowed by this paragraph must be taken into account for the period of account in which the deemed Schedule E payment is treated as made.
(3)No deduction in respect of the matters mentioned in sub-paragraph (1) may be made except in accordance with this paragraph.
18(1)The following provisions apply in calculating for tax purposes the profits of a business carried on by a partnership that is treated as making in connection with that business a deemed Schedule E payment.
(2)The amount of the deduction allowed under paragraph 17 is limited to the amount that reduces the profits of the partnership for the tax year to nil.
(3)To the extent that in any tax year the expenses of the partnership in connection with the relevant engagements exceed the sum of—
(a)the amounts that would be deductible for the purposes of Schedule E if the worker had been employed by the client and the expenses had been incurred by the worker, and
(b)5% of the amount taken into account in Step One of the calculation in paragraph 7 as the intermediary’s receipts in respect of the relevant engagements,
they shall be left out of account in calculating the profits of the business.
19(1)In this Schedule “associate”—
(a)in relation to an individual, has the meaning given by section 417(3) and (4) of the Taxes Act 1988, subject to the following provisions of this paragraph;
(b)in relation to a company, means a person connected with the company within the meaning of section 839 of the Taxes Act 1988; and
(c)in relation to a partnership, means any associate of a member of the partnership.
(2)Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of his by reason only of that interest except in the following circumstances.
(3)The exception is where—
(a)the individual, either on his own or with any one or more of his associates, or
(b)any associate of his, with or without other such associates,
has at any time on or after 14th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control more than 5% of the ordinary share capital of the company.
(4)In this paragraph “employee benefit trust” has the meaning given by paragraph 7 of Schedule 8 to the Taxes Act 1988.
(5)Sub-paragraphs (9) to (12) of that paragraph apply for the purposes of this paragraph in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.
(6)In sub-paragraph (3) “associate” does not include the trustees of an employee benefit trust by reason only that the individual has an interest in shares or obligations of the trust.
20References in this Schedule to “the Inland Revenue” are to any officer of the Board.
21(1)In this Schedule—
“associate” has the meaning given by paragraph 19;
“associated company” has the meaning given by section 416 of the Taxes Act 1988;
“business” means any trade, profession or vocation and includes a Schedule A business;
“company” means a body corporate or unincorporated association, and does not include a partnership;
“employer’s national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions;
“engagement to which this Schedule applies” means any such engagement as is mentioned in paragraph 1(1);
“national insurance contributions” means contributions under Part I of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or Part I of the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992;
“PAYE provisions” means provisions of—
section 203 of the Taxes Act 1988 or regulations under that section, or
sections 203A to 203L of that Act;
“tax year” means a year of assessment.
(2)References in this Schedule to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in his capacity as a member of the partnership or association.
(3)For the purposes of this Schedule—
(a)anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and
(b)a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.
The reference in paragraph (b) to an individual’s family or household has the same meaning as in Chapter II of Part V of the Taxes Act 1988 (provisions relating to the Schedule E charge): see section 168(4) of that Act.
(4)For the purposes of this Schedule a man and a woman living together as husband and wife are treated as if they were married to each other.
22(1)This Schedule has effect for the tax year 2000-01 and subsequent years and applies in relation to services performed, or to be performed, on or after 6th April 2000.
(2)Payments or other benefits in respect of such services received before that date shall be treated as if received in the tax year 2000-01.
23(1)This paragraph applies where an individual or partnership—
(a)is carrying on a business at the beginning of the year 2000-01, and
(b)is treated as making one or more deemed Schedule E payments for that year in connection with that business.
(2)Where this paragraph applies the individual or partnership may elect that—
(a)the business shall be deemed to have been permanently discontinued at the end of the year 1999-00, and
(b)a new business shall be deemed to have been set up and commenced on 6th April 2000.
(3)Notwithstanding the deemed discontinuance, the old business and the new business shall be treated as the same for the purposes of section 385 of the Taxes Act 1988 (carry-forward of losses against subsequent profits).
(4)Any such election as is mentioned in sub-paragraph (2) must be made by being included in a return made and delivered on or before the due date.
(5)In the case of an election by an individual—
(a)the reference in sub-paragraph (4) to a return is to a return under section 8 of the [1970 c. 9.] Taxes Management Act 1970 (personal returns), and
(b)the “due date” means the day specified in relation to the return under subsection (1A) of that section.
(6)In the case of an election by a partnership—
(a)the reference in sub-paragraph (4) to a return is to a return under section 12AA(2) or (3) of that Act (partnership returns), and
(b)the “due date” means the day specified in relation to the return under subsection (2) or, as the case may be, subsection (3) of that section.
24Nothing in this Schedule affects the operation of section 134 of the Taxes Act 1988 (workers supplied by agencies).