ESM11020 - Check Employment Status For Tax: Glossary of terms

Glossary of terms

• Agency – This is the employment agency or provider who supplies workers, via their intermediary, to a hirer. They may also be responsible for paying a worker, or their intermediary. Note that where agencies hire workers directly to work for clients, without a personal service company or other intermediary, separate Agency Legislation applies which can be found here
• Client – This is the organisation who is/will be in receipt of a worker’s services. This organisation can also be known as the hirer, or the engager.
• Commuting – The costs of travelling to, and from, a worker’s normal workplace.
• Contractual chain – This is the chain of separate contracts between each of the parties from the hirer to the worker’s intermediary.
• Contrived arrangements – Where parties deliberately use information that does not reflect the actual contractual or working arrangements, or artificially create circumstances to arrive at a particular outcome.
• Employment status – Whether a worker is regarded as employed or self-employed for tax and NIC purposes.
• Engager – This is the organisation who is/will be in receipt of a worker’s services. This organisation can also be known as the hirer, or the client.
• Financial risk - Where a worker, or their intermediary, bears some of the significant costs of a contract from which they may make a profit, or suffer a financial or accounting loss. A financial risk can also arise from investment in capital equipment and hardware required by contracts.
• Hirer – This is the organisation who is/will be in receipt of a worker’s services. This organisation can also be known as the client, or the engager.
• Intermediary – There are the three different types of intermediary that workers can provide their services through:
  1. A Limited company, commonly known as a personal service company (PSC). See ESM9010 for the conditions that must be satisfied for the legislation to apply to a limited company.
  2. A partnership. See ESM9010 for the conditions that must be satisfied for the legislation to apply to a partnership.
  3. An individual through a non-corporate relationship. CEST refers to this as an ‘unincorporated body’.
• Off-payroll working (IR35) – This is a reference to the Intermediaries Legislation (IR35), the 2017 reform to those rules for public sector hirers and the extension of this reform in 2021 to medium and large-sized hirers outside of the public sector. The rules require people who work in a similar way to an employee, but through their own intermediary, to pay tax and NICs like employees.
• Substitute – This is another person who the worker can send in their place who is able to do their work for the hirer.
• Worker – This is the individual doing the work.