ESM2055 | Agency and temporary workers: agency legislation - provisions from 6 April 2014: agency legislation - an explanation of “supervision, direction or control as to the manner in which the services are provided”

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

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

The legislation doesn’t apply if the manner in which the worker personally provides the services isn’t subject to (or to the right of) supervision, direction or control (SDC)by any person.

Only one part of SDC- either supervision, direction or control must be met. If the manner in which the worker personally provides the services is subject to (or to the right of) supervision by any person this is met even if there is no direction or control.

SDC is not defined in legislation. For the purposes of the agency and travel and subsistence legislation SDC:

• Does not require consideration of the wider employment status test. Financial risk, the right to personal service etc, are not considered when considering if Supervision, Direction or Control is present.

• Is not a question of the establishing the extent of SDC- it is either present or it is not

This means that the agency legislation may apply to a group of workers who, applying usual employment status rules, would be self-employed if they were working directly for the client.

The meaning of SDC has not been considered before tribunals or the Courts and therefore, HMRC will consider the ordinary meaning of the words.

Tribunals and the Courts considered the meaning of the employment status indicator ‘control’ when determining a worker’s employment status so they looked at the meaning of control in the context of all the relevant indicators. Those tribunal/Court decisions were not made to determine if SDC was present.

Supervision is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person where appropriate in order to develop their skills and knowledge.

Direction over the manner in which the worker provides the services is making a worker do their work in a certain way by providing them with instructions, guidance, or advice as to how the work must be done. Someone providing direction will often co-ordinate how the work is done as it’s being undertaken.

Control over the manner in which the worker provides the services is someone dictating what work a person does and how they go about doing that work. It includes telling or instructing a worker about how they do the work. Control over the manner can also include having the power to move a person from one job to another. If someone can say ‘don’t do it like that’ or ‘do it like this’ then they have a right of control as to the manner in which a person works. Control should be considered in the context of the work being undertaken. For some types of work, control can be present even if the nature of the work means that the individual will not be told how to do the work.

Supervision, direction or control focuses on the manner in which a worker carries out their work. To be clear about this, the engager and HMRC need an understanding of the broad picture of an arrangement.

Contained at ESM2056 are details of fictional examples intended to explain when:

(i) the worker has been subject to supervision, direction or control

(ii) the worker has not been subject to supervision, direction or control, but there is a right to subject the worker to supervision, direction, or control

(iii) the worker has not been subject to supervision, direction, or control and there was no right to subject the worker to supervision, direction, or control.

In all of the examples, the individual (the worker) does not enter into a contract with any of the end clients to whom they are providing the services. Nor does the worker provide their services to the client via a personal service company, a managed service company, or an umbrella company.