Income Tax (Earnings and Pensions) Act 2003 section 61R

Application of Income Tax Acts in relation to deemed employment

Section 61R explains how the Income Tax Acts apply to the deemed direct payment that arises under the off-payroll working rules, including the treatment of the worker as an employee for tax purposes and the special rules for partnerships and non-UK-resident clients.

• The worker is treated as employed by the person making the deemed direct payment, and the Income Tax Acts (including PAYE) apply on that basis
• The deemed direct payment counts as taxable earnings, capping allowable employment deductions and enabling mileage allowance relief under section 232
• Where the intermediary is a partnership or unincorporated association, the deemed direct payment is taxed as the worker's personal income, not as partnership or association income
• A non-UK-resident client with no UK place of business is treated as UK-resident where the worker is UK-resident and the services are performed in the UK