Guidance

Off-payroll working rules for agencies

Find out about the off-payroll working rules (IR35) for agencies, when the changes to these rules apply and how the changes will affect you.

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.

An agency is any party in the contractual chain between the client and worker’s intermediary. There can be several agencies in a labour supply chain. The agency may also be responsible for paying a worker’s intermediary.

If you supply a worker who provides their services through an intermediary to a client in the public sector, or a medium or large-sized organisation outside the public sector, you will have responsibilities under the off-payroll working rules.

The conditions about size only apply to clients. If you are a small-sized agency you will still have responsibilities under the off-payroll working rules.

Your responsibilities

You will have responsibilities under the off-payroll working rules if you’re an agency and you supply workers that are not directly employed by you to:

  • any public sector client
  • medium and large-sized clients outside the public sector
  • another agency who supplies a worker for public sector clients or medium and large-sized clients outside the public sector

Public sector organisations and medium and large-sized clients outside the public sector are responsible for:

  • making an employment status determination to decide if the rules apply
  • telling the worker, and agency or other labour provider they contract with of their status determination, and their reasons for making it

Your responsibilities if you are the deemed employer

The responsibility for deducting Income Tax and employee National Insurance contributions, and paying employer National Insurance contributions, sits with the deemed employer.

Under the off-payroll working rules, the deemed employer is the qualifying person or organisation sitting at the lowest point in the supply chain, but above the worker’s intermediary, who is in possession of the Status Determination Statement (SDS).

The deemed employer will be the client until they tell the worker and the person or organisation they contract with of their status determination. The deemed employer must give reasons for their status determination. The person or organisation they contract with (the first agency) is then the deemed employer, if they meet certain qualifying conditions, unless or until they pass the status determination down the supply chain to the person or organisation they contract with.

Read more about your responsibilities as a deemed employer.

Your responsibilities if you are not the deemed employer

If there is another agency below you in the supply chain, you are responsible for passing the status determination statement down the supply chain.

If you do not receive the Status Determination Statement, you should pass on payment without deducting Income Tax and National Insurance contributions. You can also ask the client or agency immediately above you in the labour supply chain why you did not receive the Status Determination Statement.

You may not receive the Status Determination Statement because the client is a small-sized client outside the public sector, as these do not have to consider if the rules apply. If you are the agency the client contracts with, you can ask the client to confirm its size.

You may not receive the determination because a worker has been deemed as outside the rules by their client, in which case the worker will need to account for any individual and business taxes.

If you are the first agency in the labour supply chain

You should carefully consider who you enter into contractual arrangements with to provide labour.

This is because the liability may transfer back to you if HMRC cannot collect outstanding Income Tax or National Insurance contributions from parties below you in the chain. This may be because they have dissolved for reasons other than a genuine business failure and there is no realistic prospect of collecting the tax from them.

You may be offered schemes that wrongly claim to get around the off-payroll working rules.

Find out how to recognise tax avoidance schemes.

Published 22 August 2019
Last updated 8 March 2023 + show all updates
  1. Details of the off-payroll working rules prior to April 2021 have been included where appropriate.

  2. Details of the off-payroll working rules prior to April 2021 have been removed.

  3. The guidance has been updated to reflect that the off-payroll working rules changed from 6 April 2021.

  4. Information about a delay due to the coronavirus (COVID-19) pandemic removed.

  5. This page has been updated to reflect the delay to the changes to the off-payroll working rules until 6 April 2021.

  6. Information about how to check if you're the fee-payer and your responsibilities if you are the fee-payer has been updated after the review of the off-payroll working rules from April 2020.

  7. First published.