SolvedESM8160 | Basic principles: How to work out the deemed payment where there is more than one worker: example
From HM Revenue & Customs · Employment Status Manual
Mr D and Mr E work through a service company. The service company enters into a contract to supply their services to a client. Under that contract the service company:
is paid a daily rate of £150 for Mr D’s services and £200 for Mr E’s services. Mr D works for the client for 130 days and Mr E for150 days.
receives £49,500 in total from the contract. This represents £19,500 for Mr D’s services and £30,000 for Mr E’s services, based upon the daily rate.
During the year the service company had the following expenses:
| - | Mr D | Mr E |
|---|---|---|
| Salary | 3,500 | 4,000 |
| Pension contributions | 3,000 | 4,500 |
| Travel expenses | 2,500 | 3,000 |
The deemed payments are calculated as follows:
| Step | - | Mr D | Mr E |
|---|---|---|---|
| Step One | Income from relevant engagements | 19,500 | 30,000 |
| Deduct | - | - | - |
| Step One | 5% flat rate allowance | 975 | 1,500 |
| *Step Three | Travel expenses | 2,500 | 3,000 |
| Step Five | Pension contributions | 3,000 | 4,500 |
| Step Six | Employer’s NICs | 0 | 0 |
| Step Seven | Salary | 3,500 | 4,000 |
| Step Eight | Employer’s NICs on deemed payment | 1047 | 2087 |
| Step Nine | Deemed payment | 8,478 | 14913 |
2025-26 NICs rates used in example.
*Note: the expenses deducted at Step Three cannot be deducted again at Step Seven even though they are part of the remuneration package.