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HMRC internal manual

Employment Status Manual

Basic principles: off-payroll working: prevention of double taxation

Section 61W Chapter 10 ITEPA 2003

Regulation 23 The Social Security (Miscellaneous Amendments No.2) Regulations 2017

Where the worker receives a payment or benefit (end-of-line remuneration) from their intermediary AND

That end-of-line remuneration can reasonably be taken to represent remuneration for services of the worker to a public authority AND

A deemed payment has been treated as paid to the worker AND

The recipient of the underlying chain payment has borne the costs of PAYE / NICs then the worker can treat the amount of end-of-line remuneration as reduced but not below nil) by any one or more of;

  • The amount of the deemed payment net of income tax and Class 1 NICs
  • The amount of any Capital Allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 CAA 2001 (PAYE purposes only).
  • The amount of any contributions made, in the same year as the end-of-line remuneration is drawn, for the benefit of the worker by the paying intermediary into a registered pension scheme which would otherwise not be chargeable to income tax as income of the worker. (PAYE purposes only)

Where we refer to underlying chain payment we mean the amount brought into Step One of the deemed direct payment calculation.


John’s PSC receives a payment, net of PAYE and Class 1 National Insurance of £7,300. This includes an amount of £1,500 VAT.

The PSC will include the VAT exclusive amount of £5,800 as turnover. With no other expenses this will be free to draw by Jon as remuneration and / or dividends. John decides to take the whole £5,800 as remuneration during the year, this amount of £5,800 is the end-of-line remuneration. John is therefore able to set-off an amount up to the net deemed payment (also £5,800) before any liability to PAYE / NICs arises on that end-of-line remuneration.