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Where the off payroll working rules apply (see the Off payroll working (IR35) ― public sector, large and medium clients ― overview guidance note), the fee payer is required to calculate and settle the PAYE on the deemed direct payment (DDP).

The fee payer is responsible for the deduction of tax and NIC from payment, and will account for these amounts to HMRC via Real Time Information (RTI) in the same way as for employees. Unlike the situation with employees, however, the actual payment is made to the intermediary and not directly to the individual. However, the PAYE paid will be based on the PAYE information for the individual. The fee payer also pays employer’s NIC on top of the DDP as well as the apprenticeship levy where relevant, as it is treated as an employer for PAYE purposes.

HMRC guidance is at ESM10000 onwards. See also Simon’s Taxes E4.1043.

The remainder of this guidance note assumes that the contract referred to is within the off payroll