SolvedESM8170 | Basic principles: how to work out the deemed employment payment where the intermediary has income that is not from relevant engagements - example
From HM Revenue & Customs · Employment Status Manual
Mr F works through a service company, F Services Ltd, in which he owns all of the shares. F Services Ltd receives £60,000 during the year of which:
£40,000 is in respect of relevant engagements and
£20,000 from other business activities which do not fall within the rules.
F Services Ltd incurs the following expenses during the course of the year:
Mr F is paid a salary of £20,000
the employer’s NICs on the salary is £1,905
employer’s pension contributions of £4,000
travel costs relating to relevant engagements £500
The deemed payment is calculated as follows:
*Step 6 - calculated by using salary paid in year, less the annual earnings threshold for secondary Class 1 NICs, multiplied by 15%. 2025-26 rates used in example.
| Step | - | Amount | Amount |
|---|---|---|---|
| Step One | Income from relevant engagements | - | 40,000 |
| - | Deduct | - | - |
| Step One | 5% flat rate allowance | 2,000 | - |
| Step Three | Expenses | 500 | - |
| Step Five | Pension contributions | 4,000 | - |
| Step Six | Employer’s NICs paid in year | 2250* | - |
| Step Seven | Salary paid in year | 20,000 | - |
| - | Total deductions | 28,750 | - |
| - | Net amount | - | 11,250 |
| Step Eight | Employer’s NICs on deemed payment | - | 1,468 |
| Step Nine | Deemed payment | - | 9782 |