Recruitment tax – agency tax, agency workers

As the recruitment and supply industry has evolved, so have the tax rules.


On the face of it, tax rules for agencies, contractors and workers should be fairly straightforward. All the tax rules are generally based on the employment status of an individual as regards the work being undertaken. Liability for tax then follows as determined by the legislation, usually ITEPA. Unfortunately, the reality of making a status determination is often far from simple. Lawspeed offers expert support in this area.

Since 1975 recruitment agencies have generally been required to pay employment tax and NICs on payments made to individual agency workers. IR35 has been around since 2000, and since 6th April 2017 new rules (Chapter 10 “IR35”) have applied to recruitment businesses that supply contractors to public authorities. Other rules apply to ‘false self employment’ and various freelancer and contractor payroll models, and HMRC is set upon its campaign to tackle tax avoidance.

Whether relating to PAYE, the self employed or IR35 the tax rules are complex. The consequence is that, whether or not direct liability for unpaid levels of tax is imposed on businesses or their directors, a plethora of risks is in play ready to catch the unwary. “a plethora of risks is in play ready to catch the unwary”.

Employment status for both tax and actual employment purposes is central to all our work involving alternatives to regular employment, and Lawspeed recruitment contracts and terms of business  address the issues comprehensively whilst reflecting the nature of the arrangement and providing suitable commercial protection.

For recruitment agencies, hirers and contractors we also offer IR35 contract terms reviews as well as representation and advice in the event of an HMRC investigation.

There are many service providers that offer “tax efficient” services whilst at the same time entering the supply chain. Lawspeed offers suitable terms to address the relationship and protect against tax risk. In addition our SPA accreditation , an independent accreditation open to umbrella companies and service providers, helps both agencies and hirers assess relevant risk; necessary to make informed decisions and recommendations, whilst at the same time showcasing the provider’s compliance credentials.

Please contact us with your enquiry. 01273 236236