Off-payroll working rules in the public sector for intermediaries

How to pay yourself, through your intermediary, for off-payroll work (often known as IR35) in the public sector.


The off-payroll working rules are in place to make sure that, where an individual would have been an employee if they were providing their services directly, they pay broadly the same tax and National Insurance as an employee.

If you use your own intermediary (most commonly a limited company that you control) to provide your services to a public authority client, the client is responsible for deciding if the off-payroll working rules should apply.

If the rules apply, Income Tax and Class 1 National Insurance contributions (NICs) will be deducted from the payments you receive.

You’ll need to:

  • provide the fee-payer (the public authority, agency or third party responsible for paying your intermediary) with the information they need to deduct tax and NICs from the payment they make
  • report to HM Revenue and Customs (HMRC) on your own, and your intermediary’s, tax affairs

You’ll need to account for and pay tax and National Insurance differently for work you do for private sector clients.

Payments received from the fee-payer

The fee-payer will pay VAT (if you’re VAT registered) and then deduct Income Tax and primary Class 1 NICs from your fee. This means the payment you receive will be net of tax.

For example:

  1. Your company invoices the fee-payer for £7,200 for services provided (£6,000 fees and £1,200 VAT).
  2. From your fees of £6,000, the fee-payer deducts £1,613 (£1,200 tax at 20% basic rate and £413 primary Class 1 NICs) which it pays to HMRC.
  3. Your intermediary receives a payment of £4,387 for your services plus £1,200 VAT.
  4. The fee-payer also pays secondary NICs.

If the person paying your intermediary is outside of the UK, slightly different rules apply.

Pay yourself through your company

The off-payroll working legislation allows your intermediary to deduct the amount of the payment it receives (which has had tax and NIC deducted) from its taxable income, so it won’t be taxed twice.

There are a number of ways your intermediary can pay you for your services. This can include paying you a:

  • salary through your company’s payroll
  • dividend from the company’s profits


You can pay yourself for the work provided to public sector clients through your company’s payroll. As employment taxes have already been paid on the amount your intermediary receives, you can pay yourself that amount without deducting Income Tax or NICs.

You can report non-taxable payments your company pays you on the Full Payment Submission (FPS) that your payroll software produces. If you use Basic PAYE Tools, you don’t need to report these payments.

Secondary Class 1 NICs will be payable on earnings paid through your company’s payroll on which you deduct primary Class 1 NICs.


If you’re a director of your own company, you might choose to pay yourself a dividend from the company’s profits. You can pay yourself a tax-free dividend up to the total of the deemed direct payment received from contracts in the public sector, where Income Tax and NICs have been deducted at source. You don’t need to declare that dividend on your Self Assessment tax return.

Corporation Tax calculations

When you are calculating your company’s turnover, you should deduct the VAT exclusive amount of the invoice, which is the amount from which Income Tax and NICs were deducted at source. Your company accounts should show this deduction to make sure the amount is not taxed twice.


If you’re VAT registered, you should continue to include VAT in your invoices. You’ll need to file your VAT returns and pay HMRC any VAT payments that are due.

Published 3 February 2017
Last updated 22 August 2017 + show all updates
  1. If you use Basic PAYE Tools, you don't need to report non-taxable payments your company made to you.
  2. First published.