Income Tax (Earnings and Pensions) Act 2003 section 56

Application of Income Tax Acts in relation to deemed employment

Section 56 explains how the Income Tax Acts, including PAYE, apply to the deemed employment payment that arises under the intermediaries legislation (commonly known as IR35).

• The Income Tax Acts, including PAYE, apply to the deemed employment payment as though the worker were an employee of the intermediary carrying out the relevant engagements as duties of that employment.
• The deemed employment payment is treated as taxable earnings from the deemed employment, ensuring that allowable deductions cannot exceed the amount of the deemed payment, and for the purposes of mileage allowance relief under section 232.
• Where the intermediary is a partnership or unincorporated association, the deemed employment payment is treated as received by the worker personally and not as income of the partnership or association.
• Where the worker is UK resident and the services are provided in the UK, the intermediary is treated as having a place of business in the UK, regardless of whether it actually does.