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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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How to account for the deemed payment: settling the liability

An intermediary should have most of the information needed to calculate the deemed payment available before 5 April. Therefore, it should be possible for it to make a good estimate of the amount of additional tax and Class 1 NICs due on the deemed payment either at that point, or shortly afterwards. The tax and NICs due in respect of the deemed payment should be paid to the Collector on or before the following 19 April, under the normal PAYE rules for payments made in the last income tax month of the tax year.

Where a detailed calculation is not possible, we will accept a payment on 19 April of a lower amount on account of the tax and NICs due, as long as the Revenue is notified on the Employer’s Annual Return (P35) that the amount paid is provisional. This should mean that the intermediary need not necessarily consult his accountant before making the payment on 19 April.

The intermediary should submit its form P35 by 19 May. If it is possible at that time to finalise the calculation, it should:

  • include the correct figures for all pay (including the deemed payment) on the P14 in respect of the individual concerned
  • put the correct figures for tax and NICs on the P35, and
  • pay any difference or, exceptionally, request a repayment. Otherwise, it should be made clear that the figure is still provisional.

Interest will be charged, calculated from 19 April, on any underpayment of the tax and NICs due at that date in respect of the deemed payment, but no penalties will be sought for late filing if:

  • the P35 is received by 19 May and box 6 on the form is ticked to indicate that a deemed payment is due, and
  • an amended P35 including the correct final figure for the tax and NICs in respect of the deemed payment is sent in to the Revenue by 31 January following the end of the tax year.Interest will run from 19 April, but no penalties will be charged under Section 98A TMA 1970 if these procedures are complied with.

NB: no extra time is allowed where the deemed payment is due during the tax year following an in year event (see ESM3183).

If the original deemed payment on which the 19 April payment of tax and NICs was based was inadequate, but that amount and the tax and NICs on it were reflected on P14s, additional P14s showing only the additional amount of the deemed payment and the tax and NICs on it should also be submitted. Where a form P60 has already been issued the intermediary should give the worker a letter showing the additional amounts.