Tax Tips For Temporary Workers
14th July 2016
What You Need To Know About Getting Temporary Work Through Agencies
Agencies can be a good way of getting temporary work in your summer holidays, or once the kids have gone back to school. It's worth getting to know the ins and outs before you get started, though. Here's a rundown of what you need to know.
How Does Getting A Job Through An Agency Work?
Agencies work by setting you up with "end clients". The hours you work get logged and sent to the agency, who give you your money. Weirdly, you don't technically work for the agency or the client, but you're getting your cash and your National Insurance contributions are being paid.
Is It True You Can Claim More Expenses By Getting Work Through an Agency?
A lot has changed around the rules relating to agency work in recent months, and even if you've worked this way in previous years, or talked to people who have done agency work in the past, things are quite different now.
One of the areas where it gets tricky is when you look at your expenses. Until April this year agency workers used to be able to claim expenses for travel and subsistence (the cost of your food while at work) but this has changed - and left a lot of people much worse off each week.
You still might be travelling to a lot of different workplaces on a temporary basis for your agency, but now you can't claim tax relief on your costs. In fact, HMRC have been taking a closer look agencies recently, and they haven't liked a lot of what they've found.
Am I Self Employed If I Work For An Agency?
One thing some agencies have been doing is dodging some of their responsibilities and costs by calling workers "self-employed". This dumps the responsibility of paying tax and NICs onto the workers themselves (which means that you have to sort everything out and pay it yourself, rather than it being dealt with before you get your wages).
HMRC clamped down on this, partly because a lot of workers didn't understand (or weren't even told) that they were self-employed and so ended up getting into HMRC - sometimes even fined - through no fault of their own. The rules were tightened so that agencies and other "employment intermediaries" had a harder time ducking their obligations.
In technical terms it comes down to what is know as the issue of "supervision, direction and control". What this means is that an agency can't call someone self-employed if they're working like a normal employee. This can get even muddier for temporary workers. Some are finding themselves caught in the middle, treated as employed for PAYE, but without the rights and protection that go with it.
In many cases, that means no minimum wage, no sick pay and no paid leave. To cut a long story short, if you're thinking of signing up with an agency, make sure you know where you stand - and if anything about it sounds dodgy get some expert advice.
Is An Umbrella Company The Same As An Agency?
Temporary workers sometimes sign up with "umbrella companies". Unlike a normal agency, an umbrella company employs you directly. You get paid by them under PAYE, but they send you out to end clients to do the actual work. Under the old rules, this meant that workers would qualify for tax relief on some of their day-to-day expenses. For example, end clients' premises were classed as "temporary workplaces", meaning that you could claim the tax back on money spent on travelling to them.
The problem was that HMRC has ruled that this meant umbrella companies were cheating the system - or at least bending its rules. For instance, some were pumping up expense claims, or even making up completely false ones. In April 2016, the taxman stomped his foot down. It's now a lot harder to qualify for tax relief on expenses, and its hitting some temporary workers hard.
Again, the "supervision, direction or control" rules come into play - and some employment intermediaries are still trying to get around them. They've tried to push workers into the "half-and-half" situation we talked about above. They've also tried using "Personal Service Companies", set up like one-man agencies, to try and dodge the rules.
The bottom line is this: you need to be a bit cautious when you're picking an agency for temporary work. There are certainly good ones, but they don't all have your best interests at heart. In particular, steer clear of any company that looks like it's trying to duck HMRC's rules.