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HMRC internal manual

Employment Status Manual

Agency and temporary workers: agency legislation - provisions from 6 April 2014: agency workers - agencies

Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, sections 45 and 46

Social Security (Categorisation of Earners) Regulations 1978, Regulation 1(2)

The legislation will apply when a worker personally provides their services (see ESM2035) to a client under, or in consequence of, a contract between the client (or a person connected with the client) and an agency and the relevant conditions are met (see ESM2034). In this context, an agency is any third party interposed between the worker and the client for whom they provide the services. An agency can include an unincorporated body of which the worker is a member. The agency does not have to place the worker with the client for the legislation to apply.

When a worker enters into arrangements with an agency to personally provide their services to a client and the arrangements come within the agency legislation, then any remuneration received by the worker (from any person) under, or in consequence of the arrangements, is treated for income tax purposes as earnings from an employment with the agency that contracts with the client (or a person connected with the client).

For NICs purposes, the remuneration is employed earners earnings for Class 1 purposes. For the purposes of paragraph 2 of Schedule 1 and paragraphs 2 and 9 of Schedule 3 of the Categorisation Regulations:

  • An ‘agency’ means either a UK or foreign agency
  • A ‘foreign agency’ means a person (including a body of persons unincorporate of which the employed person is a member) who does not have a place of business, residence or presence in GB
  • A ‘UK agency’ means a person (including a body of persons unincorporate of which the employed person is a member), who has a place of business, residence, or presence in GB.

For the conditions that must be met for the agency legislation to apply, see ESM2034.

For the responsible employer for tax, see ESM2039, and for the secondary contributor for Class 1 NICs, see ESM2040.

When a worker is providing their services via a service company (including a PSC), see ESM2051.

For partners, unincorporated bodies, and their members, see ESM2050.

For professional workers, see ESM2048.