SE11930 - PAYE avoidance: agencies and offshore employers

Section 203L ICTA 1988

Agencies and offshore employers - general

Where an individual is engaged by an agency and works for a client through that agency, there is normally no employment as such but where Section 134 ICTA 1988 applies (see the Employment Status Manual (ESM)) remuneration is taxed under Schedule E.

From 6 April 1998 where a worker in this position is awarded readily convertible assets there is an obligation on the agency to operate PAYE under Section 203L(1A) - see example SE11940

Where an employee works for someone in the UK but is employed and paid by an employer offshore the UK person has to operate PAYE. From 6 April 1998 the UK person is required to operate PAYE on awards of readily convertible assets in the same way as on cash.

This also applies where individuals are engaged by agencies and paid by offshore agencies, clients or intermediaries see example SE11941 and example SE11942. The table in SE11931 shows whose obligation it is to operate PAYE where an individual is paid by an offshore agency or intermediary.

PAYE obligation before 6 April 1998

In some of the circumstances described in the table at SE11931 there was no obligation to operate PAYE before Section 203L was extended from 6 April 1998. The final column in the table identifies the section under which the tax charge arises and where the charge arises under Section 203L, do not seek PAYE for years before 1998/99.

In cases of difficulty submit to Employment Income Technical.