Operating inside IR35

[northernladuk]

If you are operating inside IR35, can you leave money in the company, in a tax efficient way, to build up a warchest?

Like this?

http://forums.contractoruk.com/accou...side-ir35.html

[DonkeyRhubarb]

Like this?

http://forums.contractoruk.com/accou...side-ir35.html

Thanks. The OP in that case was only talking about leaving a portion of the 5% expense allowance in the company.

What about leaving a much bigger amount in the company (say 50%)? Does being inside IR35 require all of the income, bar the 5% expense allowance, to be paid out as salary under PAYE?

[northernladuk]

All the profit is considered income and taxed as such. Leaving it in the company doesn't make a difference unless you plan not to pay the correct tax which is evasion. IR35 is about personal taxation.

[jamesbrown]

Thanks. The OP in that case was only talking about leaving a portion of the 5% expense allowance in the company.

What about leaving a much bigger amount in the company (say 50%)? Does being inside IR35 require all of the income, bar the 5% expense allowance, to be paid out as salary under PAYE?

This was answered by Contratax. There's no obligation to pay the money out via PAYE during the year (although you do need a PAYE scheme), but the deemed payment will apply at the end of the year, so I can't see the logic of leaving any already-taxed money in the company, plus you have the hassle of reconciling this to the taxes already paid when it is eventually extracted.

More info here:

https://www.gov.uk/guidance/ir35-wha...-if-it-applies

[DonkeyRhubarb]

OK, so pension is the only real tax mitigation strategy inside IR35.

Now that it's much easier to get money out of a pension at 55, it's quite a good option.