Agency Workers: Rules from 6 April 2014

What is the tax treatment of workers supplied through UK-based agencies, employment businesses or other staff supply intermediaries?

Subscribers, click here for the detailed (subscriber guide) to the agency rules: new and old.

At a glance

The agency worker rules apply when workers supply their services to an agency for the onward supply to an end client.

Agency rules v. Off-Payroll Working rules

Reporting requirement

From 6 April 2015, intermediaries who do not deduct PAYE and NICs from payments made to self-employed workers are subject to a quarterly reporting requirement and late filing penalties apply, see Agency Workers and Employment Intermediaries (subscriber version) for full details of reporting and the new penalty regime.

Who is affected?

These rules will apply where:

The rules do not apply if the manner in which the worker provides the services is not subject to supervision, direction or control (SDC) by any person.

What is an agency?

An agency is any third party interposed between the worker and the client for whom they provide the services. The agency does not have to place the worker with the client for the legislation to apply. 

A worker's own PSC is not an agency for the purposes of these rules. If the worker supplies their services via a PSC, the Off-Payroll Working rules are applied instead.

Provision of services

For the agency legislation to apply, there must be a contract between the client (or a person connected with the client) and the agency, under, or in a consequence of which:

It is not necessary for the contract between the agent and the client to provide for the services of a named individual.  The legislation will apply if any worker personally provides their services, even if that worker is a substitute.

Also note that, unlike the pre-6 April 2014 position, there is no specific requirement for an 'agency contract' to exist between the agency and the worker for the agency legislation to apply.

Supervision, direction or control (SDC)

The exercise of the right to exercise SDC must be over the manner in which the services are rendered.

There does not need to be SDC over when, where or what is to be done, only over how the work is to be done.

What the rules mean

When all of these conditions are satisfied, the following provisions will apply:


The legislation includes a Targeted Anti-Avoidance Rule (TAAR) to deter tax avoidance.


An associated penalty regime has been introduced. 


Off-Payroll Working At a glance

Agency Workers: Employment intermediaries rules
You supply your personal services to an agency who supplies you to and end client

Off-Payroll Working with private sector end clients 
You supply your personal services via your own PSC to an agency who supplies you to a large or medium-sized end client

Off-Payroll Working with public sector end clients
You supply your personal services via your own PSC to an agency who supplies you to a public sector end client

IR35: Off-Payroll Working
You supply your personal services via your own PSC to an agency who supplies you to a small-sized end client

Personal Service Companies & tax 
What's new for PSCS? What tax rules apply when changes to VAT and travel rules 

External links

In April 2016 HMRC published guidance entitled Employment Intermediaries: personal services and supervision, direction or control which provides clarification and detailed examples as to the meaning of SDC and how HMRC will determine whether the test is met.  See HMRC updated guidance: Supervision, Direction or Control.