Section 1112C | Calculation of relevant PAYE and NIC liabilities ^F1

From legislation.gov.uk

1 April 2026

(1)This section determines the amount of a company’s relevant PAYE and NIC liabilities for a payment period for the purposes of section 1112B.^F1

(2)The amount is to be calculated as follows.^F1

Step 1Take the total amount of the company’s PAYE and NIC liabilities for the payment period (see section 1112D).

Step 2Add any amount produced by the application of subsection (4) or (6) to the company as company A.

Step 3Deduct any amount produced by the application of subsection (4) or (6) to the company as company B.

(3)An amount is produced by subsection (4) where—^F1

(a)two companies (“company A” and “company B”) are connected,^F1

(b)company A incurs expenditure in the payment period on externally provided workers (see sections 1127 and 1128), and^F1

(c)company B incurs staffing costs in the payment period in providing any of those workers for company A.^F1

(4)The amount produced is the sum of the amounts given, in relation to each worker in respect of whom subsection (3)(c) is satisfied, by—^F1

Formula

X \times \frac{Y}{Z}

where—

X is the amount of expenditure that—

has been incurred on staffing costs by company B in providing the worker for company A, and

forms part of the total amount of company B’s PAYE and NIC liabilities for the payment period (see section 1112D),

Y is the amount of company A’s expenditure on the externally provided worker that has been taken into account in calculating the amount of company A’s qualifying expenditure for the payment period, and

Z is the total amount of company A’s qualifying expenditure on the externally provided worker (see section 1127) for the payment period.

(5)Subsection (6) produces an amount where—^F1

(a)two companies (“company A” and “company B”) are connected,^F1

(b)company A incurs qualifying contractor expenditure in the payment period, and^F1

(c)company B incurs staffing costs in the payment period in undertaking on behalf of company A any of the research and development to which that expenditure is attributable.^F1

(6)That amount is such amount of those staffing costs as forms part of the total amount of company B’s PAYE and NIC liabilities for the payment period (see section 1112D).^F1

(7)In this section as it applies for the purposes of section 1042I—^F1

“qualifying expenditure” (except in the expression “qualifying expenditure on the externally provided worker”) means expenditure that is qualifying Chapter 1A expenditure by virtue of section 1042D, 1042E or 1042F;

“qualifying contractor expenditure” means expenditure that is qualifying Chapter 1A expenditure by virtue of—

section 1042E, or

section 1042F as it applies by reference to section 1042E.

(8)In this section as it applies for the purposes of section 1058(1)—^F1

“qualifying expenditure” (except in the expression “qualifying expenditure on the externally provided worker”) means qualifying Chapter 2 expenditure (see section 1051);

“qualifying contractor expenditure” means qualifying expenditure that is qualifying Chapter 2 expenditure by virtue of—

section 1053, or

section 1053A as it applies by reference to section 1053.