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HMRC internal manual

Employment Status Manual

BAsic principles: how to work out the deemed payment: step eight - example using step by step guide

Ms G is a worker whose service company has earned income from a relevant engagement. The service company paid her a salary of £3,000 during the year. The amount at Step Seven is £30,000. This produces the following figures:
 

earnings to date £3,000
   
the amount at Step Seven £30,000
the secondary Class 1 NICs threshold £4,385
the secondary Class 1 NICs percentage rate 0.122

Using the template at ESM3171 the calculation is as follows:
 

Enter in this box the earnings to date 1 3000
     
Enter in this box the amount at Step Seven 2 30000
Enter in this box the secondary Class 1 NICs earnings threshold 3 4385
Enter in this box the secondary Class 1 NICs percentage rate 4 0.122
Deduct the figure in box 1 from the figure in box 3 and enter the result in this box 5 1385
Deduct the figure in box 5 from the figure in box 2 and enter the result in this box 6 28615
Multiply the figure in box 6 by 100 and enter the result in this box 7 2861500
Add 100 to the figure in box 4 and enter the result in this box 8 112.2
Divide the figure in box 7 by the figure in box 8 and enter the result in this box 9 25503
Add the figure in box 9 to the figure in box 5 and enter the result in this box (a) 10 26888
Deduct the figure in box 10 from the amount at box 2 (b) 11 3112

(a) this is the amount of the deemed payment - £26,888

(b) this is the amount of secondary Class 1 NICs due on the deemed payment - £3,112