ESM8160 - 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 拢150 for Mr D鈥檚 services and 拢200 for Mr E鈥檚 services. Mr D works for the client for 130 days and Mr E for150 days.
- receives 拢49,500 in total from the contract. This represents 拢19,500 for Mr D鈥檚 services and 拢30,000 for Mr E鈥檚 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:
Step |
- |
Mr D |
Mr E |
|---|---|---|---|
Step One |
Income from relevant engagements |
19,500 |
30,000 |
Deduct |
- |
- |
- |
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鈥檚 NICs |
0 |
0 |
Step Seven |
Salary |
3,500 |
4,000 |
Step Eight |
Employer鈥檚 NICs on deemed payment |
1047 |
2087 |
Step Nine |
Deemed payment |
8,478 |
14913 |
2025-26 NICs rates used in example.
*Note: the expenses deducted at Step Three cannot be deducted again at Step Seven even though they are part of the remuneration package.