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Income Tax (Earnings and Pensions) Act 2003

Chapter 7: Application of provisions to agency workers

175.In broad terms, workers must normally be engaged under either a contract of service (in which case they are employed) or a contract for services (in which case they are self-employed). However, some workers may be contracted to an agency to perform duties for the agency’s client. This Chapter, deriving from section 134 of ICTA, provides that the remuneration of such agency workers is treated as if it is employment income.

176.The rules have been restructured into four sections. There is an increased focus in subsection (2)(a) of section 44 on the agency contract (defined in section 47) under which the services provided to the client are treated as duties of an employment held by the worker with the agency. The agency pays the remuneration in a normal case.

Section 44: Treatment of workers supplied by agencies

177.This section derives from section 134(1), (4) and (5) of ICTA.

178.The conditions are set out in subsection (1). These have been set out in more colloquial English (personally providing services instead of rendering personal services) and in the case of subsection (1)(c), it has been made more obvious that the person supervising the manner of the work is not specified.

179.If all of the conditions in this Chapter are satisfied, then it operates so that:

  • the services provided by the worker under an agency contract are treated as the performance of the duties of an employment with the agency; and

  • the remuneration receivable is treated as earnings from that employment.

180.The words in brackets in subsection (2)(b), which provide that the remuneration which is treated as earnings of an employment includes any remuneration paid by the client, derive from section 134(4) of ICTA.

181.The extra focus on the agency contract is achieved by the definition of this being taken to section 47 and more significantly by the words “with the agency” in the last part of section 44(2)(a). The duties (the services provided to the client) are the deemed duties of an employment held with the agency. See Change 10 in Annex 1.

Section 45: Arrangements with agencies

182.This derives from section 134(5), (the reference to “excluded services”), and from section 134(6) of ICTA. The provision is aimed at remuneration paid by the agency while an agency worker is on their books, for a period in which the worker is not assigned to any particular client.

183.This section refers to “a third person (“the agency”)” in place of the phrase “another person” used in ICTA. See Change 11 in Annex 1.

Section 46: Cases involving unincorporated bodies etc.

184.This section ensures that the agency rules apply in circumstances where the worker is a partner or member of an unincorporated body. They also apply in the situation in which the worker is a member of the agency itself, eg a professional association.

185.It derives from section 134(2) and (3) of ICTA.

Section 47: Interpretation of this Chapter

186.This section provides definitions of terms used in this Chapter. The agency contract is defined in terms deriving from section 134(1)(a) and (b). The scope of excluded services is set out in subsection (2) and derives from section 134(5) of ICTA.

187.There is a definition of remuneration in subsection (3) which derives from section 134(7) of ICTA. This section draws on the language of section 62, which defines earnings in relation to an employment, but with its reference to “every form of payment” the scope appears wider. The section 62 definition is limited to money or money’s worth. The definition here is restricted, however, by the words of subsection (3)(a). This makes it clear that the purpose is to capture remuneration that would have been taxed had the worker been an employee of the agency or the client, but no more than that.

188.As with section 62 the language of this definition has been modernised, for example removing the word “perquisites”, while retaining the import of the source legislation.

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