A question on agency
UK entity contracts IT services of a named individual from a UK agency. The UK agency contracts with an overseas company which in turn contracts the services of the said individual who is self-employed and who issues invoices for this work. The reason there is an overseas company involved is due to the fact that the individual is usually resident overseas. However they have in fact come to work in the UK from a fixed base (for a period of 10 months). The relationship that the individual has with the UK entity for whom they are providing their services sways to that of an employer / employee type relationship - ie no substitution, requirement to be in the office between certain hours etc.
Under the agency rules I understand that the legislation does not apply where the contract is with a company, hence PAYE cannot be applied to the amounts paid by the UK agency to the overseas company. However, does this mean that perhaps the overseas company (as an agent) should be operating PAYE? In which case if they have no presence in the UK one would assume that the UK agency or UK entity should have been operating PAYE on the payments (on behalf of the overseas company)?
This is all in the past (which I am trying to clean up) and the relationship that the individual now has is that of employee of the UK agency. However in declaring the income that arose prior to this change in status, as no-one has operated PAYE (and the two said companies are large enough to know when PAYE should or shouldn't be operated) is it reasonable to follow this lead and declare the income as self-employment income. The individual has an NI exemption certificate as they continue to contribute in their home country, so at the end of the day the tax charge is the same, give or take a bit for slightly different treatment of expenditure. If not reasonable, it seems that the only way of declaring the income would be to get the UK agent / entity to agree that they should have been operating PAYE and for them to sort it out? Is there any other alternative and what realistically do you think is the easiest and quickest way to get the tax paid so that my client can sleep at night. Any suggestions would be greatly appreciated.
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