Income Tax (Trading and Other Income) Act 2005 section 164B

Intermediaries providing worker's services to public sector

Section 164B provides relief for intermediaries in the public sector off-payroll working rules by excluding certain payments from their trading profit calculations, so that income is not taxed twice — once through the deemed direct payment mechanism and again as trading income.

• Where a worker provides services to a public sector client through an intermediary, and the off-payroll working rules apply, a deemed direct payment is treated as made to the worker with tax and National Insurance deducted at source
• If the intermediary receives a payment that relates to the same services as those covered by the underlying chain payment, that receipt does not need to be included in the intermediary's trading profit calculation
• The underlying chain payment is the amount used as the starting point (Step 1) in the statutory calculation that determines the size of the deemed direct payment
• This exclusion prevents double taxation by ensuring the intermediary is not taxed on trading income that has already been subject to PAYE through the deemed payment rules