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Personal Services Application Rules

By November 25, 2020 No Comments

A few weeks back I shared my views on Labour’s election win, the likely introduction of a 39% top marginal tax rate, and the potential to see a greater focus by IR on the application of the personal services application rules.

Well lo and behold, IR have suddenly released draft interpretation statement PUB00321 ‘Income tax – Calculating income from personal services to be attributed to the working person’. At first glance, my immediate reaction would be “here we go, IR’s starting to lay the foundations”, however sucking in a few big ones and returning to my more usual calm, logical state, I suspect a look back through IR’s work programme agenda earlier in the year, would reveal that the item has been planned for a release for some time.

Now the first thing to note about PUB00321, is that it is not a comprehensive discussion by IR on the attribution rules as a whole – that detail can be sourced from the 2019 release of IR 19/02 ‘Income Tax – Attribution rule for income from personal services’. Instead, this item focusses on how one should calculate the income that needs to be attributed to the working person (as provided for in section GB 29).

The document is 45 pages in length, and contains commentary on:

  • The general attribution rule calculation ‘the lowest of three amounts’
  • Key issues to consider when computing ‘the lowest of three amounts’
  • Certain things specifically taken into account and not taken into account in the calculations
  • The extent to which the look-through status of LTC’s and partnerships is ignored
  • The treatment of dividends, both in-year and post-year
  • The implications for foreign tax credits attached to foreign personal services income derived

Like any good interpretation statement issued by IR, there are a myriad of examples throughout the commentary to explain the narrative.

If you would like to have your say on draft PUB00321, the deadline for commentary is Christmas Eve – and isn’t that approaching way too quickly!  

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