HMRC internal manual

Employment Status Manual

ESM10025 - off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: international tax issues

Section 61R Chapter 10, Part 2 ITEPA 2003
Client wholly overseas

Where a medium or large-sized non-public sector client is based wholly overseas, so there is no UK connection immediately before the beginning of the tax year because it is not UK resident and does not have a UK permanent establishment, then the rules at Chapter 10, Part 2 ITEPA 2003 do not apply (see ESM10006). The worker’s intermediary should consider whether Chapter 8, Part 2 ITEPA 2003 applies for these engagements.

For more information on whether a company is UK resident see INTM120000

Chapter 10, Part 2 ITEPA 2003 uses the definition of permanent establishment at section 1141 Corporation Tax Act 2010. For the purposes of Chapter 10, the reference to company in the Corporation Tax Act should also be read as a reference to persons that are not companies. A permanent establishment includes a fixed place of business which includes, amongst others, a branch, an office or a factory. A permanent establishment can also be any agent who has, and habitually exercises, authority to do business on behalf of the client. INTM153060 gives some further detail. If a worker provides services to an offshore client through a UK resident intermediary, that UK intermediary is not a permanent establishment of the offshore client for the purposes of Chapter 10, Part 2 ITEPA 2003.

If the client is based overseas but has a UK connection through a permanent establishment such as a branch, it is the overseas client who is responsible for discharging its responsibilities (such as issuing a SDS). If the overseas client does not meet its responsibilities it will, as a consequence, be liable for tax and NICs where the rules apply, and HMRC will pursue this debt through the UK permanent establishment.

Further guidance on this page relates to engagements other than those where the client is based wholly overseas.

Worker’s intermediary overseas

The residency of a worker’s intermediary does not need to be considered when deciding whether the off-payroll working rules apply or not. For example, the fact that a worker has registered their intermediary overseas will have no bearing on whether the off-payroll working rules apply or not.

General principles

Where a UK resident worker falls within the off-payroll working rules and provides services to a client abroad then the legislation may not apply for NICs purposes. For tax purposes, a UK resident worker is usually liable to tax in the UK on all earnings, irrespective of where the services were provided.

The worker must be a person who is within the UK charge to tax and/or liable for Class 1 NICs

Where a worker should be subject to UK tax and NICs (based on existing domicile and residency rules), then UK domestic legislation applies to the engagement. This means the engagement could be subject to Chapter 10 (income tax) / Part 2 (NICs) rules. A client does not need to consider whether Chapter 10 / Part 2 rules apply where there is no liability to tax and NICs in the UK.

The off-payroll working rules do not affect the application of tax residency rules and the same considerations apply as if the worker was engaged directly. If the worker would be chargeable to UK tax or NICs if engaged directly by the client, then the off-payroll working rules should be considered.

Worker in the UK

A worker carrying on duties in the UK for an end client will normally fall within scope of the UK charge to tax and be within the off-payroll working rules. There are some exceptions for non-UK residents visiting the UK briefly:

Where a worker carries on duties in both the UK and abroad, the deemed employer may be able to apply to operate PAYE on the worker’s earnings for work they do in the UK only. Further details can be found at:

Primary Class 1 NICs should be deducted and Secondary Class 1 NICs paid unless the worker coming to the UK can present a certificate of continuing liability, such as Form A1, confirming that they are liable to pay social security contributions in another country for which special rules apply. For example, a non-UK resident worker provides their services in the UK, but holds a certificate of continuing liability for another country. In this situation the worker would be liable for social security in their home country and so are exempt from NICs in the UK.

Alternatively, UK domestic legislation may deem NICs not to be due. For example, if an individual comes to the UK from a country without any form of agreement relating to social security, NICs may not be due for the first 52 weeks the individual is in the UK.

Worker outside the UK

For a UK-resident worker carrying on duties outside of the UK for an end client, the off-payroll working rules may not apply for NICs, however there are exceptions to this, depending on how long they will be abroad and where the client is based.

A UK resident is liable to tax wherever in the world the earnings arise, so the tax position is not affected by the location in which the duties are performed.

A worker who is not UK-resident and is performing work outside the UK is unlikely to fall within the charge to UK tax or NICs. If the worker is not chargeable to UK tax or NICs, then the off-payroll working rules will not apply.