Income Tax (Earnings and Pensions) Act 2003 section 58

Relief in case of distributions by intermediary

Section 58 provides a mechanism to prevent double taxation where a personal service company makes both a deemed employment payment and a distribution (such as a dividend) to the worker.

• Where the intermediary is a company that has been treated as making a deemed employment payment and also makes a distribution in the same or a later tax year, the company can claim relief to avoid the worker being taxed twice on what is essentially the same income
• The claim must be made by the intermediary company to HMRC within five years after the 31st January following the tax year in which the distribution was made
• Relief works by setting the deemed employment payment amount against the distribution, thereby reducing the taxable value of the distribution rather than reducing the deemed employment payment
• Where there are multiple distributions, HMRC must apply the relief first to distributions in the same tax year, then to those received by the worker ahead of other recipients, and then to earlier years before later years