ESM10022 - off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: information to be provided by worker or intermediary and consequences of failure

Section 61U Chapter 10, Part 2 ITEPA 2003
Regulation 21 Social Security Contributions (Intermediaries) Regulations 2000

This section applies to engagements where the conditions set out at section 61M Chapter 10, Part 2 ITEPA 2003 are met, and so the off-payroll working rules will apply to the engagement. The conditions are:

  • an individual (‘the worker’) personally performs, or is under an obligation to personally perform, services for another person (‘the client’), who is a public authority (see ESM10005) or a medium or large-sized organisation (see ESM10006 - ESM10009), under arrangements involving an intermediary in circumstances such that if the contract had been made directly between the client and the worker then the worker would be:
    • regarded as an employee of the client or the holder of an office under the client; or the worker is an office holder who holds that office under the client and the services relate to that office
  • the services are provided not under a contract directly with the client but through a third party (known as an intermediary).

If this is the case, the relevant person must tell the potential deemed employer whether or not the intermediary they are working through is one to which the off-payroll working rules apply.

The ‘relevant person’ means the worker or, where the worker does not provide the information, it means the intermediary. This means either the worker or intermediary can provide the information.

The ‘potential deemed employer’ is the person the legislation would deem to be responsible for operating PAYE should the off-payroll working rules apply to an engagement. This could be either the client or an agency in the contractual chain.

In other words, the worker or intermediary must tell the potential deemed employer if the conditions of liability are met or not. The conditions of liability, explained in ESM10003 and ESM10003A, set out certain conditions an intermediary must meet to be within scope of the rules.

If neither the worker nor the intermediary tells the potential deemed employer this information, the legislation works to treat the intermediary they work through as being subject to the legislation. The conditions explained at ESM10003 and ESM10003A are treated as met. If the worker or intermediary believes the intermediary is not within the scope of the rules, they must inform the potential deemed employer, so the rules are not applied incorrectly.

In some cases, the worker may not have access to the information needed in order to confirm if the conditions are met, for example, if the worker is engaged through an umbrella company and doesn’t have access to their records. If this is the case, the intermediary will be able to provide the information to the potential deemed employer instead. The worker or intermediary can inform the potential deemed employer in any way they choose to.

The worker or intermediary can inform the potential deemed employer in any way they choose.

If the worker or intermediary believes the conditions are not met, they will be subject to deductions until they tell the potential deemed employer why they don’t meet the conditions. This is because the conditions are treated as met until the worker or intermediary confirms the conditions don’t apply.