Fee-payer
Under the off-payroll working rules, the fee-payer is the party in the supply chain that pays the contractor's limited company. When a client decides an engagement is inside IR35, the fee-payer, usually the agency, must deduct tax and National Insurance and pay employer's contributions.
HMRC defines the fee-payer as the person in the chain immediately above the worker's intermediary. The deemed employer, the party that actually operates PAYE, is the lowest qualifying person above the contractor's company: one that is UK resident or has a UK place of business, has received the SDS, and is not controlled by the worker. With no agency in the chain, the client is the deemed employer. In the ordinary client, agency, limited company chain, it is the agency.
For an inside engagement the deemed employer treats each payment to the contractor's company as if it were salary. It deducts income tax and employee's National Insurance, reports through its own payroll, and pays employer's National Insurance and, where it applies, the Apprenticeship Levy on top. Those employer costs belong to the fee-payer; they are not something it can take out of the contractor's payment.
The arithmetic is why inside determinations reopen rates. Take a £550 day rate billed at £660. Outside IR35 the agency keeps £110 a day. Inside, it still owes the contractor's company £550 less the tax and employee's contributions it withholds, but it also owes employer's National Insurance at 15 per cent on earnings above the £5,000 annual secondary threshold, which once that threshold is used up is about £82.50 on a £550 day. The £110 margin now carries an £82.50 cost. Many agencies respond by renegotiating both rates or moving the engagement to an umbrella company.
Liability can move. An agency that fails to pass on the SDS takes on the tax. A client that fails to give a valid SDS or to run the disagreement process takes it on. Where someone provides fraudulent information to avoid the rules, the person who first provided it is treated as the deemed employer, and parties who passed it on in good faith are protected. Since 6 April 2024, when HMRC recovers tax from a deemed employer, it offsets tax the worker and their company already paid.
Moving an inside role to an umbrella is no longer a way to shed the risk. From 6 April 2026 an agency that supplies workers through an umbrella company is jointly and severally liable for the umbrella's PAYE, so HMRC can pursue the agency first for anything the umbrella fails to pay.
How Vayora handles it
Vayora does not act as a fee-payer's payroll. It pays contractors' limited companies gross through self-bills and pay runs, with no PAYE, RTI or National Insurance calculation, and it does not run umbrella engagements. If your agency is the fee-payer for an inside engagement, the deductions and the RTI submission happen in your payroll software rather than in Vayora, and the rates on the placement should reflect what the contractor's company is actually paid.
The longer answer: PSC or umbrella: how are contractors engaged in the UK?