Off-payroll working: transfer of liability for PAYE

HMRC is inviting comments on two sets of draft secondary legislation covering off-payroll working.

One set of regulations covers income tax. It contains detailed provisions allowing for the recovery of PAYE liabilities from a third party where a deemed employer (the party treated as making a payment of earnings to the worker’s intermediary, often referred to as the fee-payer) has failed to make PAYE tax deductions from payments made in relation to an off-payroll worker and there is no realistic prospect of recovering the outstanding income tax from the deemed employer within a reasonable period.

The third parties targeted are the client for whom a contractor working via a personal service company (PSC) has been working, and, where there are other parties in a labour chain between the client and the PSC, the party with whom the client has contracted.

These draft regulations also provide for the addition of an off-payroll worker indicator (ie, deemed employee indicator) on the PAYE RTI returns of a fee-payer. We welcome this as it should help to ensure that student and post-graduate loan repayments and auto-enrolment contributions are not accidentally triggered for deemed employees.

The second set of regulations cover NIC. They are to introduce rules for the collection of NIC similar to those mentioned above for income tax.

The draft NIC regulations also include provisions that for income tax will be included in a Finance Bill (a draft of which was the subject of a technical consultation in summer 2019 and on which we commented in ICAEW REP 86/19).

Provisions include extending the coverage of the 2017 public sector off-payroll working regime to medium and large private sector businesses, defining ‘small’, the employment status determination statement (SDS) and who is liable to account for PAYE if an SDS is not provided, the client led status disagreement process, etc.

The Tax Faculty proposes to submit comments. We are concerned that provisions that we said lacked certainty in our response on the draft Finance Bill legislation have been replicated in the draft NIC regulations.

Your comments on the draft regulations would be welcome. Please comment below or email

  • Also commercially clients or agents aren't going to bear the employers nic and apprentice levy unless forced by rarety of contractor they just cut the overall rate. so these measures result in contractors taking on personal liability for tax in guarentees and a 15% pay cut. 

  • In trying to protect hmrc they will cause a chain of contingent liability. commercial contracts include rights of recovery against the worker. this will extend up and down the chain.  Although they say blanket caught responses they are driving to destroy the contracting market into full paye . the economy will slow maybe thats why their having trouble coding MTD for personal tax ???

  • I believe this is a sledge hammer to crack a nut. If IR35 was correctly applied in the first place, there should be no need for the "off-payroll working". The danger is that the enterprise will be dampened, affecting the economy more widely.