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HMRC internal manual

Employment Status Manual

Managed Service Companies (MSC): How to calculate the deemed payment: step by step guide

The following table provides a step by step guide for working out a deemed payment and secondary Class 1 NICs on that payment:

Step One Enter in this box the amount received by the worker in respect of services provided by the worker via the MSC and which are not earnings received by the worker directly from the MSC. 1
Step Two Enter in this box the amount of any expenses met by the worker that would have been deductible from the taxable earnings from the employment, which could have been claimed as expenses against income tax if the worker had been an employee of the client and had paid for them himself. 2
Step Three Deduct the figure in Box 2 from the figure in Box 1. If the answer is nil or a negative number there is no deemed payment. Where the answer is a positive number you will need to apportion the amount between the deemed payment and employer’s Class 1 NICs. 3
  Enter the amount of employer’s Class 1 NICs in this box. 4
Step Four Deduct the figure in box 4 from the figure in box 3 and enter the amount you are left with in this box. This amount is the deemed payment. 5