HMRC ESM: OP21 conditions of liability

Published: 13 November 2020

HMRC’s Employment Status Manual has been amended following the announcement by the Financial Secretary to the Treasury, Jesse Norman, see below. The amendment is to correct the legislation which had widened the scope of ‘intermediary’ to include an umbrella company, for example. This was an unintended consequence which HMRC are now going to correct in the Finance Bill 2021.

Off-payroll working – technical change to ensure legislation operates as intended

A technical change to the off-payroll working rules will be made in the next Finance Bill. This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy.

Jesse Norman – Financial Secretary to the Treasury

Employment Status Manual: off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: conditions of liability

The off-payroll legislation (OP21) will only apply where the worker’s intermediary satisfies any one of three specific conditions set out at A to C, and is in receipt of a chain payment.

Condition A

  • The intermediary is a company,
  • is not an associated company of the client as set out below, and
  • either:  
    • the worker has a material interest in the intermediary as set out below, or
    • the worker has received a chain payment from the intermediary, or
    • the worker has rights which either entitle, or which in any circumstances would entitle, the worker to receive a chain payment from the intermediary.

HMRC have made a statement in ESM1003 that:

HMRC is aware of an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy highlighted above. A technical change to the off-payroll working rules will be made in the Finance Bill 2021. This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. An equivalent change will be made to the NICs regs.

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10003