The guidance surrounding paying an intermediary for off-payroll working (IR35) in the public sector has been updated to include an explanation of how to calculate the deemed direct payment.
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 contributions (NICs) as an employee.
In the public sector, the public authority is responsible for deciding if the off-payroll working rules apply. Where they do the fee-payer must:
Calculate a deemed direct payment to account for employment taxes associated with the contract. Deduct those taxes from the payment to the worker’s intermediary. Report to HMRC through Real Time Information the taxes deducted. Pay the relevant employers’ NICs.