HMRC internal manual

Employment Status Manual

ESM2034 - Agency and temporary workers: agency legislation - provisions from 6 April 2014: conditions that must be met for the agency legislation to apply (6 April 2014 onwards)

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Applicable from 6 April 2014

Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, section 44

Social Security (Categorisation of Earners) Regulations 1978, Regulations 1(2), 1(2), 2 (2) and 5 and paragraph 2 in Schedule 1, Part 1 and paragraphs 2 and 9 of Schedule 3

The following conditions must all be met before the agency legislation can apply:

  • the worker must personally provide services, see ESM2035 (which are not excluded services) and ESM2032, to the client, and 
  • there must be a contract (see ESM2036) between the client (or a person connected with the client) and a person who is not the worker, the client, or a person connected with the client (that is, “the agency”) and under or in consequence of that contract: (i) the worker’s services are provided, or (ii) the client or any person connected with the client pays, or otherwise provides consideration for the services, and 
  • the worker must be subject to (or to a right of) supervision, direction, or control (by any person) as to the manner in which they provide their services (see ESM2037), and 
  • remuneration (see ESM2038) receivable by the worker in consequence of providing the services does not constitute employment income/employed earners earnings before the provisions of the agency legislation are applied.

For income tax purposes, when all of the conditions are met, the worker is treated as holding an employment with the agency, the duties of which consist of the services the worker provides to the client. In consequence, the remuneration received by the worker from any person is treated as earnings from that employment with the agency and is chargeable to income tax as employment income. The employment income rules apply and PAYE must be operated.

For NICs purposes, when all of the conditions are met, the worker is treated as an employed earner for Class 1 NICs purposes. The remuneration they receive from any person is employed earners earnings for Class 1 NICs purposes. The secondary contributor is determined in accordance with Regulation 5 and Schedule 3, paragraphs 2 and 9 of the Categorisation Regulations.

The agency legislation does not apply if it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction, or control by any person (see ESM2037). However, if it is held that this is the case, the agency must keep and be able to show evidence to that effect (see ESM2042).

For circumstances when the agency legislation does not apply, including excluded services, see ESM2032.

For record-keeping requirements, see ESM2042.

*For additional Interim guidance see