Basic principles: how to work out the deemed payment: step eight
Paragraph 7 Schedule 12 Finance Act 2000/Section 54(1) ITEPA 2003
Regulation 7(1) SI 2000 No.727
The last stage in the calculation of the deemed payment is to take the figure at Step Seven and apportion it between the deemed payment and the employer’s Class 1 NICs due on that payment. This section provides details of the two formulae for doing so.
(A step by step guide is also provided at ESM8230, which takes you through the calculation without needing to use the formulae.)
If the amount of earnings paid by the intermediary to the worker during the year is greater than the employer’s earnings threshold for secondary Class 1 NICs, the deemed payment is equal to the amount at Step Seven, multiplied by:
100/(100+b), where b is the secondary Class 1 NICs percentage rate
Where the amount of earnings paid by the intermediary to the worker during the year is less than the employer’s earnings threshold, the deemed payment is equal to:
x = Earnings to date
y = The amount at Step Seven
a = The secondary Class 1 NICs earnings threshold
b = The secondary Class 1 NICs percentage rate
(A step by step guide is also provided at ESM8230, which takes you through the calculation without needing to use the second formula.)
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