Income Tax (Trading and Other Income) Act 2005 section 164A

Deduction for deemed employment payments

Section 164A allows a managed service company (MSC) to claim a trading deduction when it is treated as making a deemed employment payment to a worker, ensuring the MSC is not taxed twice on the same income.

• An MSC can deduct the deemed employment payment and any employer's national insurance contributions paid on it when calculating its trading profits
• The deduction is claimed in the accounting period in which the deemed employment payment is treated as made
• The deduction is capped at the amount that reduces the MSC's trading profits for the tax year to nil — it cannot create a trading loss
• No deduction for the deemed employment payment or related employer's NICs may be claimed other than under this section, preventing any double deduction