The Inland Revenue has reportedly elucidated its views on what type of service company it wishes to bring within the scope of PAYE. It proposes that new rules will be introduced to operate from 6 April 2000. Specifically the Inland Revenue has drawn up a list showing which cases would be caught, or not caught, by the new provisions.
The list includes the following examples of who would be caught by the new rules
* A draughtsman employed by- a company leaves on a Friday and is re-engaged to do his old job on a Monday with the sole aim of cutting tax bills
* A doctor comes to work for two years at a private hospital. She has her own service company but is directed by a consultant who takes clinical responsibility.
* A rugby player joins a club via a service company. The club can tell him when to play and train.
* A road builder hires 50 labourers through a composite service company. Each pays £50 a year to an accountant to run the company. The site manager is in day-to-day charge.
* A travel company has a new computer system installed. The company hires an IT consultant to supply support for staff for three months. She will work under direction of the IT manager.
* The head chef at a hotel is engaged through her own service company. The management cannot tell her how to cook, but they can veto menus, order special buffets.
Those that would escape the new rules will include:-
* A firm of architects are contracted by a council to provide designs for a civic centre. The con-tract must be completed within a fixed time. The council cannot tell them what to do without amending the contract
* A large insurance company sets up a call-centre and engages a health consultant through a service company to give 10 three hour talks on ergonomics. The company relies on the consultants' expertise to dictate the work done.
* An IT engineer employed by a medium-sized company decides to set up his own consultancy Later the old employer hires him at a fixed fee to checkout a millennium bug problem. The company has no on-going right of direction.
It is important that all those giving advice to individuals or companies that may or may not be caught by the new proposals are fully aware of the latest Revenue position at any given time. There may well be a need to reappraise the pension provisions for such persons.