Rules for employment intermediaries (agencies)

An employment intermediary is a person or business who arranges for someone to work for a third person. They are also often known as an ‘agency’ or ‘employment business’.

You are an employment intermediary if you supply workers to work for a client or another employment intermediary, and the client then pays you or someone connected to you for the worker’s services. The client is who the worker does the work for.

If you are an employment intermediary there are special ‘agency’ rules that apply if the workers are not already employees.

The agency rules will apply when:

• the individual workers personally provide services to a client, regardless of whether they have a right to provide a substitute (see Employment intermediaries: personal services and supervision, direction or control)
• such services are provided, or the client pays for such services, as a result of a contract between the client and you

When the agency legislation applies, the worker is treated as holding an employment with you and you are responsible for operating PAYE/NI.

The agency legislation does not apply to you if you can provide clear, unequivocal evidence that no-one has the right of supervision, direction or control over how the operative provides their services (see ESM2037 in particular), or show that the workers are already engaged as employees with PAYE/NI being fully accounted for.

Find out more about the agency legislation

You cannot use HMRC’s Check Employment Status for Tax (CEST) tool to decide if the agency rules apply.

Labour supplied to you by a third party

If the agency legislation applies and you use labour supplied by a third party, then the security company which contracts directly with the client is responsible for operating PAYE/NI, unless is it already being accounted for down the chain. Please see ESM2039 for more information.

It is important that you do the appropriate due diligence if you receive labour from a third party and contract with the clients to supply workers. If the agency legislation applies you will potentially have to account for this or ensure it is being accounted for down the chain. Your due diligence checks need to cover this.

It is important that you consider how to safeguard your business from financial and reputational risk.

Read HMRC’s advice on due diligence.

If you are an SIA approved contractor

Indicator 4.2.1 of the ACS Self-Assessment Workbook requires that an approved contractor “complies with all the relevant tax and national insurance legislation concerning people they deploy”. It also says that:

• that “all the organisation’s people must be employees orunless employeesthe fororganisation taxcan purposes”
evidence otherwise.”

This means that you must:

• “peopleknow whothe areemployment subjectstatus toof PAYEyour receiveoperatives full– employmentthat rightsis, ofwhether anthey employeeare employed or workerself-employed
• consider rightsif inthe accordanceagency withlegislation UKapplies employmentfor law”anyone you have determined to not be employees

HMRCYour expectsassessor securitywill operativesask to besee treatedevidence asof employeesthis. withIf PAYEyou andcannot Nationalprovide Insurancethis accountedevidence, for,or includingif withinthe aevidence supplyis chain.inconclusive, then they will raise an improvement need.

ThisThere meansare 4 ways to show that you mustmeet confirm the employmentrequirements of indicator 4.2.1. You can:

• provide evidence that show your operatives andare anyemployees, operativesor youtreated deployas fromemployees otherby agencies,applying companiesthe oragency otherlegislation organisations,with andthe whereappropriate PAYE/NI deducted
• demonstrate that you sub-contracthave services.

  Yourdefined assessorroles willthat askHMRC tohave seeconfirmed evidenceas ofcorrect

• provide this.documented Ifresults youfrom cannotHMRC’s provide‘Check thisEmployment evidence,Status orfor ifTax’ the(CEST) evidencetool
• show isthat inconclusive,you thencomply theywith willa raiserecent ancourt/tribunal improvementruling

We need.explain each of these in more detail below.

Evidence showing the employment status of the operatives you deploy

The evidence you provide must:

• showdemonstrate yourthe operativescorrect areemployment employees,status orof treatedyour as employees for tax purposes by applying the agency legislationoperatives
• demonstrate that you are making the correct PAYEPAYE/NI and National Insurance contributions

Some examples of the evidence you can provide are:

• the names of all of the operatives you deploy
• operatives’operative’s roles and responsibilities
• contracts with customers, suppliers and individuals
• assignment instructions
• training and induction records
• invoices
• timesheets
• rotas
• employment contracts
• payslips
• PAYE real time information (RTI)
• expenses reimbursements
• holiday records and payments
• employment intermediary reports

WhereWe amay courtinterview oryour tribunalstaff, decidescustomers onand someone’ssuppliers to confirm that the employment status,status you mayhave providedeclared evidenceis thattrue showsand youaccurate.

Defined areroles

You complianthave withdefined roles (such as ‘employee’ or ‘self-employed’) and HMRC has confirmed in writing that rulingthe ifemployment itstatus identified in these roles is identicalcorrect.

You must review these defined roles every year to confirm that:

• the workingroles arrangementsor contractual terms have not changed
• relevant legislation and/or HMRC guidance has not changed

Correspondence from HMRC will cease to be valid if either or both of the operativesfollowing you deploy.apply:

We

• there mayare interviewchanges yourto staff,the customersrole, contract, legislation or HMRC guidance
• the correspondence is more than 12 months old, except in exceptional circumstances and suppliersat toHMRC’s confirmdiscretion

Documented thatresults from the employmentCEST statustool

The answers you havegive declaredto isthe CEST tool must be true and accurate. Neither we nor HMRC will accept results achieved through contrived arrangements designed to get a particular outcome from the tool. We would treat this as evidence of deliberate non-compliance, which would result in sanctions.

Where there are changes to the role, contract, legislation or HMRC guidance, you should use the CEST tool again to check if you get the same result.

You cannot use HMRC’s Check Employment Status for Tax (CEST) tool to decide if the agency rules apply.

Court or tribunal rulings

Where a court or tribunal makes a decision on someone’s employment status, you may provide evidence that shows you are compliant with that ruling if it is identical to the working arrangements of the operatives you deploy.