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
Replies (5)
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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.