For what it's worth, because we deal with a lot of MVL situations as PSCs will have no real role in a post April 2020 world, we have researched the potential for ER to be challenged where the same or similar activity is undertaken as an employee within 2 years of the MVL.
We postulated a contractor using a PSC to sell his/her services to an intermediary and/or end client. He/she then becomes an employee of an umbrella company. (Or a permie at the end client).
By umbrella company, we mean a full on PAYE vehicle and not something that uses the title but actually offers a hidden tax avoidance scheme.
The underlying job/role/set of tasks has not changed but the legal terms of delivery have.
So does the continuing of the activity as an employee after using a PSC, invalidate a claim to ER?
The simple answer is nobody knows.
There is no single, straightforward and reliable answer.
However the balance of opinion from tax advisers, experienced trade bodies, agencies and the like is that the legislation allowing a challenge to ER is NOT intended to operate when the individual claimant is an employee.
I would therefore be confident of defending any such attempt by HMRC to challenge a claim.
It is worth noting that this is an area in which HMRC sees opportunity for abuse and will no doubt examine claims and perhaps invent ways to deny relief that make sense to them but which are unintended by Parliament and not permitted in law. Each situation therefore needs to be considered on its merits.
We postulated a contractor using a PSC to sell his/her services to an intermediary and/or end client. He/she then becomes an employee of an umbrella company. (Or a permie at the end client).
By umbrella company, we mean a full on PAYE vehicle and not something that uses the title but actually offers a hidden tax avoidance scheme.
The underlying job/role/set of tasks has not changed but the legal terms of delivery have.
So does the continuing of the activity as an employee after using a PSC, invalidate a claim to ER?
The simple answer is nobody knows.
There is no single, straightforward and reliable answer.
However the balance of opinion from tax advisers, experienced trade bodies, agencies and the like is that the legislation allowing a challenge to ER is NOT intended to operate when the individual claimant is an employee.
I would therefore be confident of defending any such attempt by HMRC to challenge a claim.
It is worth noting that this is an area in which HMRC sees opportunity for abuse and will no doubt examine claims and perhaps invent ways to deny relief that make sense to them but which are unintended by Parliament and not permitted in law. Each situation therefore needs to be considered on its merits.
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