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Purpose, scope and background (part 1)

Updated 15 December 2023

Purpose and scope of these guidelines

Off-payroll working legislation is contained in Chapter 8 and Chapter 10, Part 2 Income Tax (Earnings and Pensions) Act 2003 (ITEPA), and the Social Security Contributions (Intermediaries) Regulations 2000. 

These guidelines are for organisations who fall within the scope of the reformed off-payroll working rules, introduced in 2017 and 2021 (contained in Chapter 10).

The guidelines are primarily for clients and deemed employers who:

• are responsible for operating the off-payroll working rules

• engage workers who provide their services through their own intermediary, for example their own:

  • limited company
  • personal service company
  • partnership

The guidelines will also be helpful to:

• agencies in the supply chain
• professional bodies that represent and advise clients who are required to operate these rules

We’ve developed them to help organisations understand what HMRC considers good practice, including:

• preparing for and making status determinations for off-payroll workers
• working with others in the supply chain, to ensure all workers that provide their services through an intermediary are correctly identified and considered under the off-payroll working rules
• working with others in the supply chain to gain assurance that income tax and National Insurance contributions are being deducted by the correct operation of PAYE, when off-payroll workers are deemed to be employed

The guidelines also contain examples of good systems and processes that will help to reduce the risk of error when determining a worker’s status for tax. These include different scenarios and different organisational structures that may be caught by the off-payroll working rules.

How to use these guidelines

You should read these guidelines alongside existing off-payroll working guidance. They are not designed to be used in isolation, or to create an end-to-end process for organisations to comply with the rules.

Your organisation should apply the guidelines to reflect the complexity and scale of your own off-payroll working engagements. Use these guidelines to help make informed decisions, based on individual circumstances.

Following these guidelines will help to reduce your organisation’s risk of making errors, therefore reducing the risk of any penalty charges.

For more information, read legislation and guidance. HMRC will not provide clearance of status determinations, or give advance approval for your systems and processes.

Background to the off-payroll working rules

The reformed off-payroll working rules (contained in Chapter 10) were introduced for clients in the public sector in 2017. In 2021, they were extended to include medium and large-sized clients in the private and voluntary sectors.

The reforms shifted responsibility for determining employment status for tax, from the worker’s intermediary to the client engaging them. The rules also place responsibilities on the deemed employer, to make sure the right tax and National Insurance contributions are paid to HMRC.

Where a medium or large-sized private or voluntary sector client, or a public sector client, engages a worker who is providing services through their own intermediary, the client is responsible for determining the worker’s employment status for tax.

If the client determines that the engagement falls inside the off-payroll working rules (the worker is employed for tax purposes), they should communicate that decision to both:

• the worker
• any third party the client contracts with

This should be in the form of a status determination statement, and should include the reasons for the client’s determination.

A worker’s employment status for tax determines the taxes the worker and the deemed employer need to pay. This will depend on whether a worker is determined as employed or self-employed for that engagement.

If the worker is deemed to be employed for tax purposes, the deemed employer must deduct Income Tax and employee National Insurance contributions from fees paid to the worker’s intermediary.

The deemed employer must also pay to HMRC:

• employer National Insurance contributions
• Apprenticeship Levy, if applicable

Description of terms

Throughout the rest of these guidelines, ‘organisation’ will be used as a collective term for the client and the deemed employer.

In these guidelines where the term ‘you’ is used without further clarification, ‘you’ refers to the client.

For the purposes of the off-payroll working rules, a qualifying intermediary is defined in the HMRC employment status manual. Throughout these guidelines we will refer to a qualifying intermediary as the worker’s ‘own intermediary’.

For the purpose of the off-payroll working rules, and in these guidelines, ‘client’ refers to the organisation which the worker supplies their services to. Some organisations may refer to this as the ‘end client’.

Read the full glossary of terms used in these guidelines. This will help you understand the terms we use in these guidelines, and how they relate to terms used in business, and in the relevant legislation.

The next section of the guidelines is Training your staff (part 2).