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HMRC internal manual

Employment Status Manual

Basic principles: off-payroll working: Deductions form chain payments

Section 61S Chapter 10 ITEPA 2003

Regulation 19 The Social Security (Miscellaneous Amendments No. 2) Regulations 2017

This page applies if, as a result of section 61R ITEPA 2003 (see ESM9037), a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for HMRC in respect of the payment.

For the purposes of this page, where we refer to “the underlying chain payment” we mean the chain payment whose amount is used at ESM 9070 at Step 1 as the starting point for the calculation.

The person may deduct from the underlying chain payment an amount which is equal to the amount payable to HMRC but where the amount or value of the underlying chain payment is treated as increased by the cost of any amount due under PAYE or Contributions Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to HMRC and the amount of that increase.

Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on this, or the previous paragraph, that person may deduct the same amount from the chain payment made by them.

The guidance on this page does not apply in cases where the services-provider is treated as making the deemed direct payment or as making the payment of deemed direct earnings.