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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Basic principles: what happens when there is a relevant engagement - example

The amount paid by the client is unaffected by the legislation. The client pays B Services Ltd the full amount due under the terms of the contract, i.e. £20,000.

This has the following consequences:

  • the amount of £20,000 is be taken into account in working out the amount of the deemed payment which B Services Ltd is treated as making to Mrs B
  • Mrs B is treated as receiving a deemed payment based upon the amount of £20,000
  • this deemed payment is taxable as employment income and subject to Class 1 NICs
  • the deemed payment is normally treated as paid on 5 April, that is, the last day of the tax year in question, and
  • B Service Ltd’s taxable profits for the accounting period in which the deemed payment is treated as paid are reduced by the amount of the deemed payment and the employer’s Class 1 NICs paid on it.