Check if you're an employment intermediary
Source: gov.uk (2025-05-12)

Find out if you're an employment intermediary and what you need to do to make sure your worker's tax and National Insurance is paid correctly.

Employment intermediaries

An employment intermediary is a person or business who arranges for someone to work for a third person. They are often known as an agency or employment business.

You are an employment intermediary if you supply workers to work for a client or another employment intermediary and the client then pays you or someone connected to you for the worker’s services.

The client is the person or business who the worker does the work for.

Your tax and National Insurance obligations

If you’re the worker’s employer (https://www.gov.uk/employing-staff), you normally have to operate PAYE (Pay As You Earn) (https://www.gov.uk/paye-for-employers) as part of your payroll.

If you are an employment intermediary the agency rules may apply to you.

Under the agency rules, employment intermediaries are responsible for making sure that tax and National Insurance for workers are paid correctly.

If you are supplying workers who provide services through their own intermediary you will need to consider if the off-payroll working rules (https://www.gov.uk/guidance/off-payroll-working-for-clients) apply.

Read ESM3500 in the Employment Status Manual for details of managed service companies (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm3500).

Agency rules

Agency rules mean you need to operate PAYE as if the workers you supply are your employees. The payments the worker receives are treated as employment income.

Agency rules do not just apply to employment agencies. If you supply workers for your clients or for other employment intermediaries then you need to check if you have to operate PAYE.

Read ESM2034 in the Employment Status Manual for more details on agency rules (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2034).

When you need to follow agency rules

You must follow agency rules and operate PAYE for your worker if all the following conditions apply:
- the worker personally provides services to another person known as the client
- there is a contract between the client (or a person connected with the client) and the agency
- the client pays or provides consideration for the services of the worker
Read ESM2035 in the Employment Status Manual for more details on how agency rules apply to provision of personal services (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2035).

When you do not need to follow agency rules

Agency rules do not apply if the worker:
- is shown to provide their services without anyone (including the intermediary or the client) having the right to supervise, direct, or control the manner in which they work (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2037)
- always works from their own home, or on premises not controlled or managed by the client — unless the type of service being provided to the client means the worker must be at those premises
- provides their services as an actor, singer, musician or other entertainer, a fashion, photographic or artist’s model
Agency rules do not apply if the worker is already employed by someone else in the labour supply chain. That employer must operate PAYE, not the agency. This includes if your workers are employed through an umbrella company.

Find out what umbrella companies are and what it means for workers employed by them (https://www.gov.uk/guidance/working-through-an-umbrella-company).

More than one employment intermediary in a contractual chain

Where more than one UK employment intermediary is involved, you are treated as the employer if your business is the one that has the contract with the end client.

If there is more than one employment intermediary in a contractual chain and only one of you is in the UK, then the UK business is responsible for fulfilling PAYE obligations for the worker.

Workers supplied to work outside the UK

You must still operate PAYE if you send a worker abroad and they would normally qualify for UK PAYE deductions.

For example, an employment intermediary supplies 4 UK residents to work for 3 weeks in the Netherlands for a Dutch company. You should operate PAYE for this period if the agency rules apply.

If the agency rules do not apply, you should apply the normal employment status rules (https://www.gov.uk/employment-status).

You do not need to operate PAYE if you’re a UK agency and you are supplying non-UK resident workers to a client that is based abroad.

Workers supplied to a non-UK employer or agency with no UK presence

If a worker works in the UK for an employer who has no presence in the UK and the PAYE regulations do not apply, there are rules that can treat someone else as the employer.

If the employee works for another person in the UK, then that person is treated as the employer.

If a third party is involved, for example an agency, then the UK agency that contracts with the client is treated as the employer.

Read ESM2039 in the Employment Status Manual for guidance on how to determine the employer for tax purposes (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2039).

UK Continental Shelf workers

If a worker is a UK Continental Shelf worker in the oil and gas industry (https://www.gov.uk/guidance/tax-and-national-insurance-for-oil-and-gas-workers) there are different rules.

If the employer is in the UK, the employer must operate PAYE.

If the employer is outside the UK and does not need to operate PAYE, then an associated company in the UK is treated as the employer for PAYE.

If there is no associated company in the UK, the oil or gas license holder is treated as the employer for PAYE.

An oil and gas certification scheme operates so that a person outside the UK can meet PAYE obligations and certify this to the licence holder.

Read ESM2054 in the Employment Status Manual to find out about the oil and gas certification scheme (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2054).

Read ESM2053 in the Employment Status Manual to find out more about agency legislation for the oil and gas sector (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2053).

Reporting requirements for employment intermediaries who do not need to operate PAYE

If you are a UK employment intermediary and you have not operated PAYE (https://www.gov.uk/government/publications/employment-intermediaries-reporting-requirements), you must send HMRC an electronic return with basic information about your business and each worker you supply to a third party.

Returns are reports that must be sent to HMRC at least once every 3 months. You must fill in HMRC’s employment intermediaries report template (https://www.gov.uk/government/publications/employment-intermediaries-report-template) and use the online service to submit an employment intermediary report (https://www.gov.uk/send-employment-intermediary-report).

You may be charged a penalty if your report is late, incomplete or incorrect. Find out how to appeal an employment intermediary penalty (https://www.gov.uk/guidance/appeal-an-employment-intermediary-penalty).

Get more help

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