ESM2030 - Agency and temporary workers: agency legislation - provisions from 6 April 2014: introduction

Part 2, Chapter 7 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”), sections 44 - 47

Social Security (Categorisation of Earners) Regulations 1978 (SI 1979/1689)

This guidance explains changes in the following legislation relating to agency workers, commonly known as the “agency Legislation”, with effect from 6 April 2014.

  • Part 2, Chapter 7 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”), sections 44 - 47
  • Social Security (Categorisation of Earners) Regulations 1978 (SI 1979/1689).

The amendments, along with amendments to PAYE legislation contained in Part 11, Chapter 3 of ITEPA 2003 and associated Regulations, mean there has been a change to the way the “agency legislation” is applied, which include:

  • amending the conditions that must be met before the agency legislation will apply
  • determining the party responsible for deducting and remitting income tax under PAYE, and who must deduct, pay, and remit Class 1 National Insurance contributions (NICs) as the secondary contributor
  • introducing a new record-keeping and returns regime, with associated penalties
  • introducing a new Targeted Anti-Avoidance Rule (TAAR) to deter avoidance of the legislation
  • where appropriate, introducing provisions to transfer the liability for PAYE & NICs to the directors of a limited company (or the members of a limited liability partnership) if that business is deemed to be the workers’ employer for the purposes of this legislation and has failed or defaulted in payment.

In the context of this guidance:

  • an ‘agency’ is a third party interposed between the worker and the client for whom the worker is providing services
  • a ‘client’ is the party for whom the worker is providing services.

The agency legislation was amended in April 2014 following the Talentcore Limited Upper Tribunal decision in 2011 (See ESM7315) . Talentcore supplied consultants to major cosmetic companies for counter and promotional work at airport duty-free shops. The tribunal found that the consultants were not obliged to personally provide their services and there was an unfettered right of substitution therefore the contract was not an agency contract.

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