In a recent case, HMRC investigated whether agency workers that were being supplied to an employment agency client were actually employees of the agency rather than being self-employed and therefore subject to different taxation and national insurance rules.
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The workers were given direction and supervision by the client as would be expected if they were employees and this formed the basis of HMRC’s investigation. However, the other terms of their engagement were much more relaxed. The agency was free to decide whether or not to offer them work, just as the workers were free to decide whether or not to accept any work that was offered to them.
The workers had no contract of employment from the agency, which meant that they were not personally obliged to provide services to the agency’s clients. The only obligation for the worker was to ensure that their shift was covered and if they were unable to cover the shift themselves, they were entitled to find a suitable substitute. This represented an unfettered right of substitution, which, combined with the lack of a written contract, gave clear indication that the workers were actually self employed and should be treated as such for tax purposes.
Note: Every case is different and relates to its own specific circumstances and you should take advice if you are unsure.