»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp last stage in the calculation of the Deemed Employment Payment (DEP) is to take the figure at Step Three and apportion it between the DEP and the Employer’s Class 1 NICs due on that payment. This section provides details of the two formulae for doing so.

If, at the time a payment or benefit is received by the worker, the amount of earnings paid by the MSC to the worker is greater than the employer’s earnings threshold for Employer’s Class 1 NICs at the time the payment or benefit is made

»Ê¹ÚÌåÓýapp DEP is equal to the amount at Step Three multiplied by 100/(100+b), where b is the Employer’s Class 1 NICs percentage rate.

Where, at the time a payment or benefit is received by the worker, the amount of earnings paid by the MSC to the worker is less than the employer’s earnings threshold at that date point.

»Ê¹ÚÌåÓýapp DEP is equal to: ((y-(a-x))*100/(100+b))+(a-x), where:

• x = Earnings to date
• y = »Ê¹ÚÌåÓýapp amount at Step Three
• a = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs earnings threshold at the date the payment or benefit is received by the worker
• b = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs percentage rate

Example 1

Ms G is a worker whose MSC makes a payment of £300 to her in week 1 of the 2007 to 2008 tax Year. »Ê¹ÚÌåÓýapp MSC also pays earnings from employment of £110, and these have been subject to PAYE. This produces the following figures:

• x = Earnings to date of 110
• y = »Ê¹ÚÌåÓýapp amount at Step Three, which is 300
• a = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs earnings threshold at the date the payment or benefit is received by the worker, which is 100
• b = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs percentage rate, which is 12.8%

As the earnings of Ms G in Week 1 are greater than the Week 1 Employer’s Class 1 NICs earnings threshold, the whole of the amount at Step 3 is subject to Employer’s Class 1 NICs.

By applying the formula 100/ (100+b) (where b is the Employer’s Class 1 NICs percentage rate), we can establish that the DEP is equal to:

1. »Ê¹ÚÌåÓýapp amount from Step 3 (£300), multiplied by
2. 100/ (100+12.8)
3. »Ê¹ÚÌåÓýapp result is the amount of the deemed employment payment, £265.96
4. »Ê¹ÚÌåÓýapp amount of Employer’s Class 1 NICs is £34.04, which is the difference between the amount at Step 3, £300, and the DEP of £265.96.

Example 2

Using the same example as above, however this time Ms G receives no earnings from employment. »Ê¹ÚÌåÓýapp only payment received is £300, and this has not been treated as earnings from employment

• x = Earnings to date of 0
• y = »Ê¹ÚÌåÓýapp amount at Step Three, which is 300
• a = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs earnings threshold at the date the payment or benefit is received by the worker, which is 100
• b = »Ê¹ÚÌåÓýapp Employer’s Class 1 NICs percentage rate, which is 12.8%

Ms G’s earnings in Week 1 are less than the Week 1 Employer’s Class 1 NICs earnings threshold, as she has received no earnings from employment. An element of the amount at Step 3 will therefore not be subject to Employer’s Class 1 NICs.

We must use the formula ((y-(a-x)) x 100/ (100+b)) + (a-x):

1. ((300-(100-0))*100/ (100+12.8)) + (100-0)
2. ((300-100)*(100/112.8)) +100
3. »Ê¹ÚÌåÓýapp result of DEP Employment Payment
4. »Ê¹ÚÌåÓýapp Employer Class 1 NICs is £22.70, which is the difference between the amount at Step 3 (£300) and the amount of the DEP of £277.30.