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HMRC internal manual

Employment Status Manual

Particular occupations: subcontractors in the construction industry - background to changes in 1995-96 - agency workers

Agency workers are not normally employees (see ESM2003), but most agency workers are brought within the employment income rules by Section 134 ICTA 1988/Part 2 Chapter 7 ITEPA 2003. However before 6 April 1998, most construction workers were specifically excepted from this legislation, so agencies engaging construction workers who were not direct employees of the agency applied the Construction Industry Tax Deduction Scheme (CITDS) rather than deducting tax under PAYE.

In July 1997, it was announced that the exception from Section 134 ICTA 1988 which applies for Income Tax purposes would be removed from 6 April 1998. From that date therefore, agencies have been required to make deductions under PAYE for construction workers within Section 134 ICTA 1988/ Part 2 Chapter 7 ITEPA 2003.

The NICs regulations which govern the treatment of agency workers have never contained any exception for construction workers, and agencies have been required to deduct and account for Class 1 NICs for these workers since 6 April 1997 if they were not already doing so.