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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Agency and temporary workers: agency legislation - provisions from 6 April 2014: record-keeping and returns (6 April 2014 onwards)

Applicable from 6 April 2014

Income Tax (Earnings and Pensions) Act 2003, section 716B

Normal PAYE arrangements apply for paying and accounting for income tax and NICs to HMRC via RTI. In addition, from 6 April 2015 there is additional record keeping requirements for the agency which contracts directly with clients in the UK to provide workers.

There is an associated returns requirement. Returns must be made to HMRC on a quarterly basis and the first returns must be filed with HMRC by 5 August 2015. There is no requirement to make a return for any worker for whom income tax and NICs have been accounted for correctly under RTI.

From 6 April 2014, the agency must keep and preserve records and make returns for individual workers when they are not deducting income tax and NICs at source for those workers through PAYE. They must have in their power or possession and return certain information about the worker, which will include:

  • identity details
  • information about how they are paid and engaged
  • reasons why income tax and NICs has not been deducted by the agency
  • information about the business supplying the worker to the agency.

There is an associated penalty regime for late filing and incorrect returns, see ESM2043.

Oil and gas sector

These record-keeping and returns requirements do not apply to the oil and gas sector, see ESM2053.

Agencies engaging workers on a self-employed basis

From 6 April 2014, UK agencies supplying workers directly to a client on a self-employed basis must have in their power or possession satisfactory evidence to demonstrate the worker is not subject to (or to the right of) supervision, direction, or control (see ESM2037) by any person, in relation to the manner in which the worker provides their services.

HMRC do not consider a signed declaration from the worker that simply states they are not subject to (or to a right of) supervision, direction, or control by anyone constitutes sufficient evidence for the purposes of the Agency Legislation.

If the agency is unable to produce satisfactory evidence when requested by HMRC, then HMRC may recover from the agency the income tax and NICs due from the worker’s remuneration.