From 6 April 2014 a worker is classified as an employee (and hence subject to PAYE) of an agency if all of the following conditions are met: 

1. the worker must personally provide services, (which are not excluded services) to the client, and
2. there must be a contract between the client (or a person connected with the client) and a person who is not the worker, the client or a person connected with the client (that is, “the agency”) and under or in consequence of that contract: (i) the worker’s services are provided, or (ii) the client or any person connected with the client pays, or otherwise provides consideration for the services, and
3. the worker must be subject to (or to a right of) supervision, direction or control (by any person) as to the manner in which they provide their services, and
4. remuneration receivable by the worker in consequence of providing the services does not constitute employment income/employed earners earnings before the provisions of the agency legislation are applied.

If it is held that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person the agency must keep and be able to show evidence to that effect.

The agency legislation will not apply in the following circumstances: 

1. if the remuneration the worker receives in consequence of providing the services is otherwise chargeable as employment income before the agency legislation is applied, or 
2. when the worker is legitimately self-employed. There is an associated record keeping requirement to demonstrate when this is applicable, or 
3. where it can be shown that the worker is not subject to (or to a right of) supervision, direction or control by anyone, as to the manner in which they provide the services. There is an associated record keeping requirement to demonstrate when this is applicable, or
4. if the worker provides their services wholly in their own home, or on other premises which are not controlled or managed by the client, unless the worker is required to do so at those premises because of the nature of the services and work being provided to the client, or 
5. if the worker provides their services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model.

The last three points are referred to as ‘excluded services’ in the new legislation.

Penalties have been introduced for the keeping and preserving of records and returns.

Prior to 6 April 2014 the conditions for the agency legislation to apply included the condition for an agency contract to exist between the worker and the agency but this is not included in the new conditions.

Self employed individuals may now find themselves classified as an employee of the agency under the new legislation. If you are ceasing self employment and require assistance with the cessation then please contact us. If you require further advice please also contact us.