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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
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PAYE: special type of payer or payee: agency workers

Section 688 ITEPA 2003

If an individual is engaged by an agency and works for a client through that agency, there is normally no employment as such and remuneration receivable may not be employment income. Where Section 44 ITEPA 2003 applies (see the Employment Status Manual, ESM2000) remuneration is charged to tax as employment income.

Under Section 688 ITEPA 2003, the agency is treated as the employer in respect of any payments of PAYE income, subject to the following exceptions:

  • if a person acting on behalf of the client and at the expense of the client or a person connected with the client (the client’s intermediary) makes payment of PAYE income, the client is treated as the employer
  • if an individual working through an agency is awarded readily convertible assets (see EIM11855) the agency is required to operate PAYE (for an example see EIM11818).

Off-shore agencies and client’s intermediary

Where an employee works for someone in the UK but is employed and paid by an employer offshore, the UK person has to operate PAYE (see EIM11820). The UK person is also required to operate PAYE on awards of readily convertible assets in the same way as on cash.

This also applies where individuals are engaged by agencies and paid by either an offshore agency or the client’s intermediary (for examples see EIM11819). The table in EIM11816 shows who is required to operate PAYE where an individual is paid in cash by an offshore agency or the client’s intermediary. The table in EIM11817  shows who is required to operate PAYE where an individual is paid in readily convertible assets by an offshore agency or the client’s intermediary.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)