PAYE: Employment Agencies

Treasury written question – answered on 23rd November 2022.

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Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

To ask the Chancellor of the Exchequer, what steps HMRC is taking collect PAYE tax from agencies who use registered contractors.

Photo of Victoria Atkins Victoria Atkins The Financial Secretary to the Treasury

Under section 44 of the Income Tax (Earnings and Pensions) Act 2003, most contractors supplying services via agencies must be treated as employees for income tax and National Insurance contributions (NICs) purposes by the agencies that pay them.

These agencies are required to make deductions of income tax and employee NICs, where these are due, from the workers’ pay through Pay As You Earn in the same way and at the same level as with direct employees. The agencies will also be liable to pay employer NICs, where these are due, in respect of payments to the workers.

HMRC has a risk-based approach towards compliance activities and will investigate evidence of non-compliance or avoidance. Where HMRC finds that an agency has failed to account for tax and NICs, it will seek to recover unpaid amounts due.

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