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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Agency and temporary workers: agency legislation - provisions from 6 April 2014: remuneration

Applicable to the agency legislation pre and post 6 April 2014

Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, Part 2, Chapter 7, sections 44, 45 and 47(3)

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

When the conditions for the agency legislation to apply are all met (see ESM2034):

  • for income tax purposes, 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. All remuneration received by the worker from any person in consequence or as a result of the arrangements, is treated for income tax purposes as earnings from that employment.
  • for NICs purposes, the worker is treated as an employed earner in so far as he/she is gainfully employed in the employment. All remuneration received is treated as employed earners earnings for Class 1 NICs purposes. The secondary contributor is determined in accordance with Schedule 3, paragraphs 2 and 9 of the Categorisation Regulations.

In the context of the agency legislation, remuneration includes every form of payment, gratuity, profit, and benefit but does not include:

  • for income tax, anything that would not have been employment income if it had been received in connection with an employment, unless it is treated as employment income because of the provisions of Chapter 7, ITEPA 2003
  • for NICs, anything that would not be employed earners earnings if it had been received in connection with an employment, unless it is treated as employed earners earnings because of the provisions in the Categorisation Regulations.

The remuneration must be received by the worker in consequence of the personal services they provide to the client, but can be paid by anyone. For example a worker may receive a regular payment from their agency and also a bonus from the client for whom they work. Both payments would be treated as remuneration for the purposes of the agency legislation.

An agency worker may also receive remuneration in the form of a retainer or benefit in kind - for example, a short holiday for agreeing to remain on or join an agency’s books and be available for work.

Other information:

  • for when a worker provides their services as a partner in a firm or as a member of an unincorporated body, see ESM2050 
  • for when a worker provides their services through a service company (including a PSC), see ESM2051 
  • for professional workers, see ESM2048.