ESM3156 - How to work out the deemed payment where the intermediary has income that is not from relevant engagements - example
Mr F works through a service company, F Services Ltd, in which he owns all of the shares. F Services Ltd receives £60,000 during the year of which:
- £40,000 is in respect of relevant engagements and
- £20,000 from other business activities which do not fall within the rules.
F Services Ltd incurs the following expenses during the course of the year:
- Mr F is paid a salary of £20,000
- the employer’s NICs on the salary is £1,905
- employer’s pension contributions of £4,000
- travel costs relating to relevant engagements £500
The deemed payment is calculated as follows:
| Step One | Income from relevant engagements | 40,000 | |
| Deduct | |||
| Step One | 5% flat rate allowance | 2,000 | |
| Step Three | Expenses | 500 | |
| Step Five | Pension contributions | 4,000 | |
| Step Six | Employer’s NICs paid in year | 1,905 | |
| Step Seven | Salary paid in year | 20,000 | |
| Total deductions | 28,405 | 28,405 | |
| Net amount | 11,595 | ||
| Step Eight | Employer’s NICs on deemed payment | 1,261 | |
| Step Nine | Deemed payment | 10,334 |
