More information on Control / Entity tests:
In the correct context such a test would allow you, as “intermediary 1” (the business liable should the tax position not be correct), to better show that not only is the tax position correct but that you carry out due diligence procedures. On the other hand the test can become ‘all or nothing’, it may sound obvious but if you are going to test for something there has to be a secondary option and in this case that would be PAYE.
It is also worth noting that any such test is there to assist. If there is a company prepared to engage and pay operatives on your contracts self-employed without making anyone fill in questionnaires then this may look the easier option, but is it? The tests can give you different perspectives on how particular arrangements are perceived. This can be useful however there are certain points to consider;
One party, for example the operative, may have one idea/perception of a contract however this may not concur with another party or even another operative.
It is unusual for a consultant or operative to have any power over, or play any part in the determination of how a contract/assignment is put together and therefore their understanding may actually be completely different to your understanding or your clients understanding particularly if considering such nuance as ‘acquiescence’ over ‘contractual obligation’ for example.
The nature of questioning can often play a role in how questions are answered.
The answers would very rarely, if ever, be any kind of a binding determinant. So where particular understanding/answers point to a lack of SDC this can be useful however where they do not then this can only be counter-productive and just make it more difficult for you as you are then arguing against the recorded understanding of the operative.
So the tests can be completed by one or all parties in all circumstances, they can be utilised in an ‘audit’ capacity or not used at all. As may well now be clear, unlike many of our competitors, we do not have one system and do not believe there is always one right and one wrong.
The right of SDC must be in writing:
This was in how the Tribunal in the Talentcore case established the right of SDC (even though HMRC lost for other – now irrelevant reasons). The Judge in Talentcore looked at how the end client interacted with some of the individuals provided (exercising SDC) and inferred that the same right of SDC existed with other individuals provided even though they were performing a different task and were not subject to SDC in practice.
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