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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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How to work out the deemed payment: when the deemed payment arises

Paragraph 12 Schedule 12 Finance Act 2000/Section 57 ITEPA 2003

Regulation 8 (1), (5), (6), (7) and (8) SI 2000 No.727

The deemed payment is normally treated as made on 5 April. However, it is treated as made at an earlier date when one of the following events occurs:

Where the intermediary is a company:

  • the worker disposes of his/her shares in the company
  • the worker ceases to hold office with the company
  • the worker ceases to be employed by the company
  • the company ceases to trade (from 6 April 2002).

Where the intermediary is a partnership:

  • the partnership is dissolved or ceases to trade
  • a partner ceases to act as such, or
  • where the worker is employed by the partnership, his ceasing to be so employed.

Where the intermediary is an individual:

  • the worker ceases to be employed by the individual.

Where one of these events occurs the deemed payment is treated as being made at the date of that event. Where there is more than one event the deemed payment is treated as made at the earliest of the events.

For periods up to and including 5 April 2002, where the intermediary is a company the cessation of trade does not mean that a deemed payment is treated as paid on that date unless one of the other events occurs at the same time. However, where someone working through their service company continues to work for the company as an employee or a director then you should not normally seek to argue for this purpose that the trade has ceased at an earlier date.

The income taken into account at Steps One and Two of the deemed payment calculation should include:

  • all amounts received from the relevant engagements
  • including amounts received after the event, even if in a subsequent tax year