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Regulations: Employment agency contracts could create PAYE and NIC liability for client businesses

Under new rules, if a contract says a worker is not under the business’s supervision, direction or control, but in reality he or she is, the business could become liable for PAYE and National Insurance Contributions (NICs) for the worker. Businesses should therefore check existing contracts with employment agencies and note the new rules when negotiating new contracts.

Legal Alert

This update was published in Legal Alert - June 2014

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

HM Revenue and Customs (HMRC) periodically targets arrangements between businesses and people who work for them as independent contractors. It sometimes argues the contractors are in fact employees, and therefore the employer should be deducting PAYE and paying NICs. New rules which came into effect on 6 April 2014 now target employment agencies and their client businesses.

Under the new rules, whenever a worker provides services to a business through an intermediary company (usually an employment agency) the agency must deduct PAYE and pay NICs - unless it can demonstrate the worker was not subject to supervision, direction or control by the client business.

The onus is therefore on the agency to show that a worker is truly self-employed, rather than for HMRC to show otherwise. It is not enough to show that the contract between the agency and its business client states the contractor is not under the business’s supervision, direction or control if, in fact, he or she is.

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Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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