ESM2019 - Agency workers: procedure for new agencies

Where a new agency (other than a nursing agency: see ESM4251 onwards) is identified you should ensure that, where appropriate, the agency is aware of the provisions of Section 134 ICTA 1988/Section 44 ITEPA 2003 and Regulation 2 and the requirement to operate PAYE and pay Class 1 NICs. When writing to the new agency, include leaflet CA25 and the following guidance on the treatment of expenses payments.

‘PAYE: TREATMENT OF AGENCY WORKERS' TRAVELLING AND SUBSISTENCE EXPENSES.

I would ask you to bear in mind that any payments made to a worker to cover or reimburse the cost of travelling to the normal place of work, or the cost of meals and accommodation at that place, are taxable and liable to Class 1 NICs.

This rule applies equally to agency workers whose remuneration is to be treated as earnings from an employment with the agency

• for tax purposes, by Section 44 ITEPA 2003; or
• for NICs purposes, by the Social Security (Categorisation of Earners) Regulations 1978.

In the case of such workers, the 'normal place of work' is simply the place where they actually do the work for the client. The person who pays them the cost of travelling is responsible for deducting any and paying any Class 1 NICs liability, which is due on those payments. The same applies to any payments for meals, hotels etc. If PAYE etc is not deducted, the person who made the payments may

• have to pay the Inland Revenue the tax and NICs which should have been deducted, and
• be liable to interest and penalties.'