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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Managed Service Companies (MSC): Application of the Income Tax and NICs rules: The Deemed Employment Payment (DEP)

This part of the guidance deals with specific points regarding the application of certain Income Tax and NICs rules in respect of the legislation. For further detailed guidance on the application on the tax rules in general, refer to the Employment Income Manual (EIM).

For further detailed guidance on the NICs rules in general, refer to the National Insurance Manual (NIM).

The Income Tax Acts and the Social Security Contributions and Benefits Act apply in relation to the deemed employment payment as if:

  • The worker were employed by the MSC to provide the relevant services, and
  • The DEP was a payment by the MSC of earnings from that employment, and
  • The relevant payments or benefits (the deemed employment payment) were a payment of earnings paid to a worker (by the MSC) in an employed earner’s employment.

Note: Where the MSC is a partnership and the worker is a member of the partnership, the deemed employment payment is treated as received by the worker in the workers personal capacity and not as income of the partnership.

What this means in practice is that the MSC must deduct PAYE and account for Class 1 NICs on DEPs in accordance with the appropriate PAYE and NICs legislation irrespective of how the payment are described, who receives them or who pays them. Further, the MSC must remit the PAYE and NICs to HMRC monthly and submit an end of year return to HMRC recording payments/benefits made during the year and the PAYE and NICs due on those payments/benefits.