Tax update: Changes to off-payroll working - a guide for intermediaries

Published: Friday 26 March 2021

From April 2021, rules for off-payroll working will be changing for both contractors and businesses that engage or supply contractors. This article focuses on the impact for contractors.

The rules are changing for determining employment status where a worker (also referred to as a contractor) provides their services to an end client via an intermediary. This intermediary is most commonly the worker’s ‘personal service company’ (PSC).

Responsibility for determining status

Prior to 6 April 2021, it was the PSC’s responsibility to determine the employment status of the contractor/worker. 

After this date, however, where the end client is a medium or large sized company in the private sector, the responsibility will shift to the end client to determine status. Similar rules have already been in place for some time where the end client is in the public sector. 

When determining status, the end client will need to consider whether there would be an employment relationship if they had been engaging directly with the worker/contractor, rather than via an intermediary.

The responsibility will remain with the intermediary company, where the end client is a small private sector company.

Medium/large sized

The end client will be deemed to be medium or large if it satisfies at least two of the following criteria:

  1. Turnover of more than £10.2 million
  2. Balance sheet total of more than £5.1 million
  3. 50 employees or more

What does this mean for me?

Where you are providing services to a public sector or medium/large sized private sector client, you should receive a ‘status determination statement’ (SDS) from the end client, confirming their assessment of your employment status. This statement should also include details of the reasons behind that decision.

If you do not agree with the SDS, it is possible to appeal to the end client but not to any other independent party. The appeal must be made within 45 days from the date the SDS was received and must:

  • Refer to the SDS that you are in disagreement with
  • Provide reasons as to why you disagree
  • Keep records of any disagreements raised.

The client will then have 45 days to respond to the appeal. During that time any payments made will be based on the original determination.

If you have not received an SDS, you can request confirmation of the size of the end client to satisfy that they are small and therefore are not required to provide. The end client has 45 days to confirm their size to you.

Deemed employment

If the client determines that the off-payroll working rules apply, they will be responsible for deducting income tax and NIC and paying this to HMRC. When the worker is paid by the intermediary (e.g. PSC), therefore, there is no requirement to deduct further NIC and income tax. The payment of those fees can then be made to the worker as either:

  • a dividend – but this does not then need to be reported as dividend income on the worker’s self-assessment return; or
  • as salary – this would be paid via the PSC’s payroll but no income tax or NIC should be deducted.

Where the work is carried out for a small private end client, the responsibility to deduct any income tax and NIC for deemed employment, will remain with the PSC.


Q. I work for lots of different clients. Does this mean the rules will not apply to me? 

A. The end client has to assess based on the assignment they have with you, therefore, each assignment has to be looked at in isolation rather than based on a wider view of the clients you worked for.

Q. The end client has not issued me with an SDS or is not applying the rules. Is there anything I need to do?

A. As mentioned above, you can request details of the size of the end client. If they are small, the responsibility lies with the intermediary. If they are medium/large and they do not comply, the exposure to tax and NIC will sit with the end client. 

Q. I do not agree with the determination, but the client has dismissed my appeal. Is there anything further that I can do?

A. Unfortunately, there is no further route of appeal. As the end client is required to take reasonable care in terms of making the assessment, we are aware that many may take the overly cautious approach and deem employment, to prevent risk of a future liability to tax.

Q. If the end client determines that I have deemed employment will I receive holiday pay and other employment benefits?

A. No, unfortunately there is no entitlement to any employment benefits. Many contractors will instead look to, or be asked by the client to, work via an umbrella company, where they will continue to be able to work for a number of different clients but will have continuity of employment and receive employment benefits.  There are a wide range of umbrella companies with differing contractual terms so we would recommend that you consider and compare these carefully.

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Katie Williams
Katie Williams
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