Off-payroll working for intermediaries and contractors providing services to the public sector or medium and large clients in the private sector
Off-payroll working rules (IR35) as a contractor or an intermediary and your worker provides services to the public sector or medium and large-sized clients in the private and voluntary sectors.
The off-payroll working rules make sure that a worker (sometimes known as a contractor) pays broadly the same Income Tax and National Insurance as an employee would.
The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.
Applying the off-payroll working rules
If your worker provides services to a small client outside of the public sector, you (the worker’s intermediary) are responsible for deciding your worker’s employment status for tax.
If your worker provides services to a public sector client or a medium or large sized-client outside the public sector, the client is responsible for deciding your worker’s employment status for tax and for operating the off-payroll working rules.
If the off-payroll working rules apply, your worker’s fees will be subject to Income Tax and National Insurance contributions, which will be paid to HMRC by the deemed employer.
Providing services to a public sector client, or a medium or large-sized client outside the public sector
If your worker provides services to a public sector client, or a medium or large-sized client outside the public sector, they:
- should get an employment status determination from the client, as well as the reasons behind that determination
- will be able to dispute the determination given to them if they disagree with it
Different rules apply if your worker:
- does not get an employment status determination from the client
- provides services to small clients outside the public sector
If your worker does not get an employment status determination
This may be because they are providing services to a small-sized client outside the public sector. Your worker can ask for confirmation of the client’s size and the client will have 45 days to respond.
If the client confirms it is a small-sized organisation, you as the intermediary will be responsible for determining your worker’s employment status for tax to see if the off-payroll working rules apply.
This may be because your worker has been deemed as outside of the rules by their client so your worker will need to account for individual and business taxes.
Your responsibilities
If your worker has been deemed as employed for tax purposes by their client, the deemed employer is responsible for:
- deducting Income Tax and employee National Insurance contributions and paying them to HMRC
- paying employer National Insurance contributions and Apprenticeship Levy
Paying your worker
Your payment for your worker’s services will have already had Income Tax and National Insurance contributions deducted from them if both:
- your worker provides services to a public authority or to a medium or large-sized client outside the public sector
- the off-payroll working rules apply
This means when you pay your worker they do not need to pay Income Tax and National Insurance contributions again on those fees.
You can do this by paying it as:
- a salary through your payroll — but do not deduct Income Tax or National Insurance contributions
- dividends — these do not need to be recorded on your worker’s Self Assessment return
As the amounts have already been treated as employment income doing it this way will avoid any double payment of Income Tax or National Insurance contributions.
What to do if your worker disagrees with the determination
The client must decide your worker’s employment status and if the off-payroll working rules apply. The client must then tell your worker their determination and the reasons for it.
If your worker disagrees, they’ll need to:
- give details of the employment status determination they disagree with
- give their reasons for disagreeing
- keep copies of any records about disagreements
A disagreement can be raised until the last payment is made for the worker’s services.
The client will have 45 days from the date of receiving the worker’s disagreement to respond. During that time the deemed employer should continue to apply the rules in line with the client’s determination.
If the employment status determination has not changed, the client will have to tell your worker.
If the employment status determination has changed, the client will have to:
- give a new status determination to your worker
- confirm when the determination is valid from
Updates to this page
Published 7 March 2023Last updated 9 March 2023 + show all updates
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Details of the off-payroll working rules prior to April 2021 have been included where appropriate.
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First published.