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What is deemed payment in IR35?

To calculate a deemed payment you need to carry out the following steps:

Decide which contracts IR35 should be applied in the financial yearIf IR35 applies to more than one contract, then add them up. Do not forget to add in any any non-cash benefits in kind.To this total add any other payments from clients received where PAYE has not already been deducted Then you need to deduct 5% from this total (allowance for running a limited company)Then other deductions can be made including pension deductions and certain travel expenses Further deductions are made for any employer’s NIC your company has already paid, Class 1A NIC’s, salary and reimbursements of allowable expensesIf the remainder is negative, then no ‘deemed payment’ is dueIf the remainder is positive, then further calculations are required to work out your deemed payment

The deemed payment is due to HMRC by 19th April at the end of the applicable tax year and should be detailed on your end of year PAYE returns and Self-Assessment return.

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