ESM2035 | Agency and temporary workers: agency legislation - provisions from 6 April 2014: personal services

Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, section 44(1)

Social Security (Categorisation of Earners) Regulations 1978, Regulation 1(2), Schedule 1, Part 1, paragraph 2 and Schedule 3, paragraph 2

In the context of the agency legislation, a ‘worker’ is the person who provides their services to the client, under or in consequence of, the contract between the client (or a person connected and the client) and an agency. For the agency legislation to apply, the worker must personally provide their services to the client and the services must not be excluded services (see ESM2032).

A worker is providing their personal services when they are working for the client.

Example - illustrating which worker is personally providing their services

ABC Limited, an employment agency and asks Joe Brown to carry out a plastering job for one of the agency’s clients. Joe usually does the work himself, but he is unable to, so he sends Paul to do the job. It is Paul that personally provides his services to the client and not Joe. Therefore the agency legislation applies to Paul as he is the worker who provides his service.

Joe pays Paul. Joe bills the agency for the provision of Paul’s services and includes a premium to cover all his costs to provide Paul’s services. The agency bills the client for providing the worker’s services and uses that payment to pay Joe.

Joe accounts for the income from the agency as business income and the amount he pays Paul is accounted for as business expenditure whilst conditions 2 and 3 in ESM2036 are also satisfied.

The other conditions that must also be met in order for the agency legislation to apply are contained at ESM2034.