Agency workers and PSCs

Agency workers and PSCs

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Sorry to be beating this horse to death, but I am still confused about the interpretation of ESM2051 available here:

http://www.hmrc.gov.uk/manuals/esmmanual/ESM2051.htm

All of the PSCs that I deal with pay out their income as a combination of salaries and dividends.  Exceptionally there may also be a deemed remuneration payment under IR35, but the actual income is still paid out as a combination of actual salaries and actual dividends (and normally the deemed remuneration would be £nil anyway, by reason of sufficient salary, when IR35 applies, but that is beside the point).  The two bullet points just before half way down the page of ESM2051 state that neither payment in the hands of the employee is subject to the agency worker's regulations.

The second half of ESM2051 states that the PSC must apply the agency workers' legislation in priority to the MSC legislation, which in turn takes priority over the IR35 legislation.  But to what payments does ESM2051 envisage that the agency workers' legislation should be applied, however prioritised, given that in the previous paragraph it is apparent that there are NO payments made by the PSC that are subject to the agency workers' legislation in the first place?

To set the context, my overarching concern is to determine what exposure a second agency might have to make PAYE deductions in respect of payments made to a PSC by reason of an introduction by the second agent.  According to ESM2051 there appear to be two agencies in play that are subject t the agency legislation: the PSC and the "true" agent.

With kind regards

Clint Westwood

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By Portia Nina Levin
25th Apr 2015 12:16

(No subject)

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By nogammonsinanundoubledgame
25th Mar 2015 15:29

Where I am overthinking it.

There seem to be a number of areas where I seem to be overthinking it.

S.44(1) defines the circumstances in which the agency regulations apply.  Nowhere in s.44(1) does it refer to payments TO the worker.  It does refer to payments BY a body, in relation to service supplied by the worker, but it does not require those payments to be paid to the worker in order for the agency regs to apply to that payment.  I conclude from this that payments made to the PSC are potentially subject to the agency regs.

Nor does anything in s.44 exempt from the agency regulations amounts that are taxable on the worker under part 4 of ITTOIA (ie dividends).  S.44(2)(b) DOES exempt amounts that have been taxed as remuneration, but it is silent on relevance of the manner in which payments that have NOT been subject to PAYE might otherwise have been taxed.  So, while ESM2051 does agree with you I cannot see the legal justification.

So IF payments have been made to the PSC in circumstances that fall within s.44(1), and if some LESSER amount is paid out as remuneration by the PSC to the worker, the difference perhaps (but not necessarily) being paid as dividends, then s.44(2)(b) provides no exemption in relation to that difference.  Assuming that neither is there any exemption is available under s.44(2)(a), that leaves the difference as subject to PAYE by the agent under the agency regs.  By *which* agent (of two here identified) I still do not know.

With kind regards

Clint Westwood

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By Portia Nina Levin
25th Apr 2015 12:17

(No subject)

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By User deleted
25th Mar 2015 15:50

The advice that I have received is ...

... the payments by the agency to the PSC should not be subject to PAYE on the grounds that the PSC's income will either be paid to the worker as employment income or be treated as deemed employment income (by definition, for the agency regs to apply, the position has to be that IR35 would otherwise apply).

But the agency will have to provide details of the payments on its quarterly returns, explaining why PAYE has not been applied.

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By nogammonsinanundoubledgame
25th Mar 2015 16:02

THANK you.

I finally get it.

With kind regards

Clint Westwood

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