ESM2037 - Agency and temporary workers: agency legislation - provisions from 6 April 2014: supervision, direction or control (as to the manner in which the worker provides the services)

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

For the agency legislation to apply, it is necessary to consider whether someone has (or has the right of) supervision, direction, or control (SDC) over the manner in which the worker provides their services to the client. Only one part- either supervision or direction or control, is required.

The worker can be subject to (or to a right of) supervision, direction, or control as to the manner in which they provide their services by anyone for the agency legislation to apply. This includes the client, the agency, independent project managers, consultants, or other persons. It does not need to be exercised in practice but someone must have the right to do so for the agency legislation to apply.

To determine if this applies, HMRC will consider the worker’s arrangement in the whole. The terms of the engagement and the way the work is actually done for the engager must be considered overall to determine if a right of supervision, direction, or control over the manner in which the worker provides their services is present.

Establishing if there is control over the manner in which the worker provides their services entails considering factors such as control over how the work is done,what work is being performed by the worker and whether the worker is able to decide when or where they carry out the work (see ESM0526).

Where there are procedures, methods, and instructions which must be followed, it is likely there will be supervision, direction, or control over the manner in which the services are provided.

The relevance of such procedures, methods and instructions in considering the question of supervision, direction or control over the manner in which the services are provided is not diminished simply because the procedures, methods and instructions are imposed due to the regulatory environment in which the services are provided – see Christa Ackroyd Media Ltd [2019] UKUT 0326 (TCC) (para 58- 59) and Uber BV and others v Aslam and others [2021] UKSC 5 (at para 102).

Equally, the fact that the procedures, methods and instructions apply to all persons providing services (whether employed or self-employed) does not mean that those procedures, methods and instructions are not relevant for the purposes of supervision, direction or control over the manner in which the services are provided (or the right thereof) – see Christa Ackroyd Media Ltd [2019] UKUT 0326 (TCC) ( para 58- 59).

Where a worker is engaged by or through an agency, there will be a presumption that there is (or there is the right of) supervision, direction, or control over the worker. This means it is the responsibility of the agency that contracts with the client to whom the worker provides their services to operate PAYE (see ESM2039) and act as the secondary contributor for NICs (see ESM2040). When the agency does not consider a worker is subject to (or to a right of) supervision, direction, or control by any person, then they will need to keep evidence of this (see ESM2042).

HMRC may recover tax and NICs from the agency if they are unable to produce satisfactory evidence when requested to do so by HMRC.

There are provisions in place for HMRC to address cases where fraudulent records have been provided to HMRC to the agency by the client demonstrate the worker is not subject to (or to a right of) supervision, direction, or control (see ESM2044).

See also:

  • Further guidance and supporting examples to explain “supervision, direction, or control as to the manner in which the services are provided.” (See ESM2055 to ESM2068).
  • For professional workers, see ESM2048.