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HMRC internal manual

Employment Status Manual

How to work out the deemed payment: transitional rules

Paragraph 22 Schedule 12 Finance Act 2000

Regulation 1(2) SI 2000 No.727Although the size of the deemed payment depends upon amounts received in a tax year, the legislation only has effect with respect to income earned in respect of services performed on or after 6 April 2000. Therefore amounts received by the intermediary on or after 6 April 2000 in respect of work done before that date should not be taken into account in working out a deemed payment. Amounts received before 6 April 2000 for work done after that date are treated as received in the 2000/01 tax year and taken into account in working out the deemed payment for that period.

If an intermediary has a relevant engagement where some of the services were performed before 6 April 2000 and some on or after that date, then an apportionment should be made of the income. This should be by reference to when the services to which the income relates were performed. However, provided any apportionment made seems reasonable, you should not spend a lot of time trying to establish detailed figures.

ExampleG Services Ltd has a contract under which it provides the services of Mr G to a third party. The contract is a relevant engagement and runs from 1 January 2000 to 30 September 2000. Under the contract he has to work a five-day week for the client for which the company is paid a daily rate. There is provision in the contract for extra payments for overtime and weekend working. Over the duration of the contract the company earns £28,950.

If the work was carried out evenly over the period of the contract then it would be acceptable to apportion the income from the contract on a time basis. This could be by reference to the days prior to 6 April and on or after that date. However, if the work was carried out on a more intermittent basis then it might be necessary to make the apportionment by reference to the time actually worked.

For example, although the contract ran from 1 January the worker was only required on a part-time basis in the early stages of the contract but had to work an extensive amount of weekend overtime during the latter stages of the contract.