My company is a managed service company. Am I an “employee” or a “worker”?
You are an employee of a managed service company if, typically,
- you obtain work engagements to provide services for clients through an agency,
- you are a shareholder (but not a director) of a company, or a partner in a partnership, that has been set up by a “scheme provider”,
- the scheme provider has day-to-day management and financial control of your company or partnership, including handling payments made by clients to your company or partnership, and
- the scheme provider pays you for the work performed, less a handling fee.
It does not matter whether you are the only shareholder of your company (a “managed personal service” company) or you are one of a number of shareholders (a “composite” company). Although you are an employee of your company, not of the scheme provider, the scheme provider is required to treat you as an employee for income tax and NICs purposes.
Irrespective of how you are actually paid, the scheme provider has to treat the payment as a “deemed employment payment” at the time you receive the payment and deduct PAYE income tax and employee Class 1 NICs. The scheme provider also has to pay employer Class 1 NICs on the payment.
Before calculating the tax and NICs, the scheme provider may reduce the “deemed employment payment” by the amount of any expenses on which you would have been allowed to claim tax relief if you had been an employee of the client. However, travel, accommodation and subsistence costs incurred in travelling to and from the client’s premises may not be deducted.
If you receive benefits in addition to any payments, those benefits are also treated as earnings that are subject to tax and NICs at the time. There is no year-end P11D reporting arrangements for such benefits, as is the case with regular employees.
More FAQs Related to Employment Status – Employed or Self-employed?
What is the difference between a “contract of service” and a “contract for services”?
Who are “employees” for payroll purposes?
I am self-employed. Am I entitled to holiday pay or any other benefits from my client?
I am a company director. Am I an “employee” or a “worker”?
I find work through a recruitment agency. Am I an “employee” or a “worker”?
I am self-employed. Why does my client insist on putting me on the payroll?
I am subject to IR35 rules. Am I an “employee” or a “worker”?