ESM8140 - Basic principles: how to calculate the deemed payment: step by step guide
Basic principles: how to calculate the deemed payment: step by step guide
Step |
What to do |
Box number |
|---|---|---|
Step One |
Enter in this box the amount of all payments and benefits received by the intermediary in that tax year in respect of the relevant engagement |
1 |
Step One |
Enter in this box 5% of the amount in box 1 |
2 |
Step Two |
Enter in this box the amount of any payments and benefits received directly by the worker and not otherwise chargeable to tax as employment income in respect of the relevant engagement |
3 |
Step Three |
Enter in this box the amount of any expenses met by the intermediary, 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 |
4 |
Step Four |
Enter in this box the amount of any capital allowances in respect of expenditure incurred by the intermediary that the worker could have claimed if employed by the client and he or she had incurred the expenditure |
5 |
Step Five |
Enter in this box the amount of any contributions to a registered pension scheme by the company for the benefit of the worker |
6 |
Step Six |
Enter in this box the amount of any employer’s Class 1 and Class 1A NICs paid by the intermediary for that year in respect of salary or benefits in kind provided to the worker during the year |
7 |
Step Seven |
Enter in this box the amount of any salary and benefits in kind received by the worker from the intermediary which are already taxable as employment income (this does not include anything for which a deduction has already been given at Step Three) |
8 |
- |
Add together the figures in boxes 1 and 3 and enter the sum in this box |
9 |
- |
Add together the figures in boxes 2, 4, 5, 6, 7, and 8 and enter the sum in this box |
10 |
- |
Deduct the figures in box 10 from the figures in box 9 and enter the answer in this box. 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 using the stencil at ESM8220 |
11 |
- |
Enter the amount of employer’s Class 1 NICs in this box |
12 |
Step Eight |
Deduct the figure in box 12 from the figure in box 11 and enter the amount you are left with in this box. This amount is the deemed payment |
13 |