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HMRC internal manual

Employment Status Manual

Basic principles: How to work out the deemed payment where there is more than one worker: example

Mr D and Mr E work through a service company. The service company enters into a contract to supply their services to a client. Under that contract the service company:

  • is paid a daily rate of £150 for Mr D’s services and £200 for Mr E’s services. Mr D works for the client for 130 days and Mr E for150 days.
  • receives £49,500 in total from the contract. This represents £19,500 for Mr D’s services and £30,000 for Mr E’s services, based upon the daily rate.

During the year the service company had the following expenses:

  Mr D Mr E
Salary 3,500 4,000
Pension contributions 3,000 4,500
Travel expenses 2,500 3,000


The deemed payments are calculated as follows:

    Mr D Mr E
Step One Income from relevant engagements 19,500 30,000
Step One 5% flat rate allowance 975 1,500
*Step Three Travel expenses 2,500 3,000
Step Five Pension contributions 3,000 4,500
Step Six Employer’s NICs    
Step Seven Salary 3,500 4,000
Step Eight Employer’s NICs on deemed payment 940 1,807
Step Nine Deemed payment 8,585 15,193

*Note: the expenses deducted at Step Three cannot be deducted again at Step Seven even though they are part of the remuneration package.