Using an agency
Disabled people and carers
If you are looking for a personal assistant (PA) to help you live independently at home, one option is to ask a care agency to find you a suitable PA. You can pay for an agency PA using your own money or, if you qualify for Government support, you may be able to use that money to pay for an agency PA.
Will I become an employer if I use an agency?
If you take on a PA through an agency, and the agency is not just an ‘introductory’ agency, the agency will be the employer and will be responsible for many things including deducting tax and National Insurance contributions.
You will enter into an agreement with the agency which sets out what tasks the PA will cover and the terms and conditions covering your payments to the agency and other important issues.
Is using an agency more expensive than paying my own carer?
The rates charged by agencies for agency PAs may vary and may appear higher than employing a PA directly. This is because the agency will be responsible for all underlying employment costs such as holiday pay and sick pay and so they factor this into the rates they charge to the users of their services. As they are a commercial business, they will also want to build in a margin for themselves.
What are the advantages and disadvantages of using an agency?
One advantage of using an agency is that they will be able to provide cover for sick leave or annual leave. You will not have to deal with the tax and employment law responsibilities that come with taking on your own PA.
One disadvantage is that you may be sent different agency PAs rather than building a relationship with just one person.
What is a ‘self-employed’ agency/PA?
In general, most agency PAs should be taxed through PAYE which means the agency collects tax and national insurance from their wages and pays it over to HMRC.
Where the agency has to operate PAYE then it also has to pay employer National Insurance in respect of the worker's wages. This is a cost to the agency, however it is usually covered in the fee that is charged to you, as the end client, by the agency.
In recent years, some agencies have been trying to avoid having to operate PAYE for workers – this means that their costs are reduced, the benefit of which is sometimes passed on to the end client by charging slightly lower fees. They do this by saying that the worker is 'self-employed', so that the worker has to pay their tax and NIC to HMRC themselves and there is no employer NIC to pay.
However, treating a worker as ‘self-employed’ like this, leaves them in a vulnerable position and means that the government is losing money.
There are therefore rules which essentially say that the only time a care agency can escape operating PAYE is where the worker is NOT under the supervision, direction or control (or the right thereof) of any person (including the end client) as to the manner they undertake their work. Please note that workers are assumed to be under supervision, direction or control, unless it is shown otherwise.
As such, and as part of the sign-up process, they may ask the end client (you) to complete a checklist or questionnaire, in writing for their records, so that they can establish whether the worker will be under supervision, direction or control (and thus, whether they have to operate PAYE).
If you decide to use an agency to provide you with a PA and you find yourself in the situation where you are asked questions about what supervision, direction or control the worker will be under, you must answer these questions accurately and carefully. In the event of an enquiry by HMRC, any questionnaires you have completed will be closely examined and HMRC could come to you instead of the agency for any unpaid PAYE in situations where it should have been operated but was not, depending on their interpretation of the information provided by you to the agency.
Agencies must send details to HMRC of workers they place with end clients where they do not operate PAYE. This means HMRC have visibility over agency worker engagements.
HMRC provide extensive guidance which includes examples of where HMRC would consider that the manner in which the worker provides their services is not subject to supervision, direction or control.
From the guidance, we can see HMRC consider that supervision, direction and control are best defined as follows:
- Supervision is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person where appropriate in order to develop their skills and knowledge.
- Direction is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate how the work is done, as it is being undertaken.
- Control is someone dictating what work a person does and how they go about doing that work. Control also includes someone having the power to move the person from one job to another.
They also give a helpful example of where they think supervision, direction and control would not apply in the context of a PA (see page 14 of the document accessed through the link). However, where you give instructions to the PA and have procedures which must be followed by them, it is likely there will be supervision, direction or control over the manner in which the services are provided and therefore a PAYE obligation on the agency.
It may be tempting to give the agency information which means that they do not operate PAYE, as this may mean lower costs for you. However, where there is any element of doubt, then it is best to err on the side of caution and tell the agency that the worker will be under your supervision, direction and control, so as to protect yourself as best as possible from any potential problems with HMRC at a later date.
Why else might I need to consider whether the agency PA is under my supervision, direction or control?
Agency PAs often work on lots of different engagements and may incur substantial travel costs in getting to their various work locations, from their homes. However agency PAs (and other temporary workers employed through an employment intermediary) are prevented from claiming relief on their home to work travel and subsistence expenses if they are under the supervision, direction or control (or the right thereof), of any person, as to the manner in which they undertake their role.
As such, you may be asked whether a worker who is supplied to you by an agency is under supervision, direction or control (of the right thereof)– as explained in more detail above. Please note that, for this purpose, workers are assumed to be under supervision, direction or control, unless it is shown otherwise.
There are debt transfer provisions that you should be aware of in situations where tax is underpaid because of false information about supervision, direction or control provided by you, to the agency.
What if my agency PA is from an ‘offshore agency?’
An offshore agency means an agency that is situated outside of the UK – sometimes to in order to take advantage of lower taxes or costs or less stringent regulation.
If the agency that you use is an offshore agency, please be aware that in some circumstances (i.e. where they consider themselves outside the reach of HMRC and do not operate PAYE), you – the end client – may be obliged to operate PAYE.
HMRC’s guidance on the matter can be found in their Employment Income manual.
Although offshore agencies are not as prolific as they once were, it is important to ensure you check whether the agency that you are using has a trading address in the UK. Please remember that the Isle of Man and the Channel Islands (e.g. Jersey and Guernsey) are ‘offshore’ in this context.