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HMRC internal manual

Employment Status Manual

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Agency and temporary workers: agency legislation - provisions from 6 April 2014: the secondary contributor for NICs (6 April 2014 onwards)

Applicable from 6 April 2014

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

From 6 April 2014, there are new provisions prescribing who is the secondary contributor for Class 1 NICs, where a worker provides their services to a client under (or in consequence of) a contract between the client and a third party - including through a foreign agency or employer. This will only apply where the worker is not already an employee of another employer. Where the worker is an employee, the NICs legislation will apply in the usual way to their employer.

For NICs purposes when the agency legislation applies, Regulation 2(2) and Schedule 1, Part 1, paragraph 2 of the Categorisation Regulations treats the worker as an employed earner gainfully employed in the employment. For workers provided to a client by a UK agency, regulation 5 and paragraph 2 of Schedule 3 treats the agency as the secondary contributor who is responsible for deducting primary Class 1 NICs, for paying secondary Class 1 NICs and remitting the total NICs due to HMRC via RTI. Where there is more than one UK agency involved in the arrangements all based in the UK, then the agency who is party to the contract with the client is the secondary contributor for NICs.

When the worker’s services are provided under or in consequence of a contract between the client and a third party based outside the UK, the secondary contributor for Class 1 NICs is determined according to paragraph 9 of Schedule 3 of the Categorisation Regulations.

Worker employed by foreign employer

When the worker is employed by a foreign employer and provides services, then:

  • when the services are provided to a host employer, then the host employer is the secondary contributor. A host employer means a person having a place of business, residence, or presence in GB.
  • when the services are provided to a client in GB under or in consequence of a contract between that client and a UK agency, then the United Kingdom (UK) agency who has the contractual relationship with the client is the secondary contributor.
  • when the services are provided to a person outside the (UK) under or in consequence of a contract between that person and a UK agency and the worker is eligible to pay contributions in the UK in relation to that employment, the UK agency who has contractual relationship with the person outside the UK is the secondary contributor.

Foreign agencies

If a worker is employed under or in consequence of a contract between a foreign agency and a client in GB and provides services to that client, then the client is the secondary contributor. If the worker is employed by a foreign agency and provides services to a client in GB under or in consequence of a contract between that client and a UK agency, the UK agency who has the contractual relationship with the client is the secondary contributor.

Services provided to person outside UK

When a worker is employed by a UK employer and provides services to a person outside the UK under or in consequence of a contract between that person and a UK agency and the worker is eligible to pay contributions in the UK in relation to that employment, then the UK employer or UK agency who has the contractual relationship with the person outside the UK is the secondary contributor.

Where the employment is as a mariner the above three sub-sections only apply where the duties of the employment are performed wholly or mainly in category A, B, C, or D waters (within the meaning given in the Merchant (Categorisation of Waters) Regulations 1992) and notwithstanding anything in regulations 122 and 124(1) of the Social Security (Contributions) Regulations 2001.

There are some special international NICs rules that can interact with this guidance, see the National Insurance Manual (NIM) for details.

Other information:

The agency legislation does not prevent any party that pays the worker from deducting Class 1 primary NICs and paying these with Class 1 secondary NICs to HMRC. However, if they fail to meet the NICs liabilities in full, the responsible agency or client (as explained above) will be held liable.

There is a record-keeping/returns requirement and a penalty regime, see ESM2042 and ESM2043.

This page does not apply to the oil and gas sector where special provisions apply, see ESM2053.