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Inside IR35 - no dividend payments at all?

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  • Unix
    replied
    Originally posted by Whoknows View Post
    Being inside IR35 with a single running contract, no other company income - would there be any circumstances where you could still receive a dividend payment (alongside the large salary)

    Looking at the popular calculators (e.g. Nixon Williams) the IR35 output shows a net dividend of £3k+ (on £500/day).

    Can someone explain?
    Who told you, you were inside? I have a bridge I want you to buy.

    Leave a comment:


  • Whoknows
    replied
    Originally posted by VectraMan View Post
    Okay, I may be wrong.
    I've just checked with a different accountant (still waiting for mine to come back to me) and they have confirmed that both the FRS 'gain' and the 5% expenses allowance - are excluded from the IR35 salary calculation, and contribute to a potential company profit.

    Conflicting stories.....

    Leave a comment:


  • VectraMan
    replied
    Okay, I may be wrong.

    Leave a comment:


  • Whoknows
    replied
    But that £78k they use isn't exclusive of VAT in their example!

    A business has gross sales of £84,000 (including output VAT at 20% of £14,000), and expenses of £48,750 (including irrecoverable

    They only take the flat rate off to get the £78!

    Leave a comment:


  • VectraMan
    replied
    Yes I have:

    Service companies (‘IR35’) legislation - deemed payment calculation
    The amount to be included under step 1 of the deemed payment calculation is the VAT exclusive amount whether or not the flat rate scheme is adopted. For the intermediary within the flat rate scheme in the example above the VAT exclusive amount would be £78,960. Irrecoverable VAT relating to allowable expenses met by the intermediary would be allowable as part of the expenses in the same way as if the intermediary was not VAT registered. For more information on IR35, see ESM3000 onwards.
    BIM31585 - Value Added Tax: flat rate schemes

    Phew.

    Leave a comment:


  • VectraMan
    replied
    Originally posted by Whoknows View Post
    Take a look at this example I found. The 5% clearly rolls on to be available as a dividend, but the FRS gain doesn't. The gain is added in to the salary calculation....

    They also base the 5% on the VAT exclusive turnover.

    https://www.whitefieldtax.co.uk/web/...taxexample.pdf
    Yes that does seem to contradict the way I thought it worked. I'd like to see this detailed on an HMRC website somewhere because I haven't managed to find any clear information.

    The starting point for working out the deemed payment is the amount received by the intermediary in the tax year in respect of engagements to which the legislation applies. From this amount a flat rate 5% is deducted, to cover other unspecified expenses, such as running costs of the intermediary (see ESM3160).
    ESM3145 - How to calculate the deemed payment

    The question is whether the FRS gain is "in respect of engagements to which the legislation applies". You could have a second outside IR35 contract, bank interest, or other income that's nothing to do with IR35 and so wouldn't be part of the deemed payment or 5% calculation. I would have interpreted the FRS gain being like that; it's essentially a bonus from HMRC for operating your whole company in a particular way, not specific to one income stream.

    Leave a comment:


  • Whoknows
    replied
    Originally posted by VectraMan View Post
    I was referring to the principle
    Take a look at this example I found. The 5% clearly rolls on to be available as a dividend, but the FRS gain doesn't. The gain is added in to the salary calculation....

    They also base the 5% on the VAT exclusive turnover.

    https://www.whitefieldtax.co.uk/web/...taxexample.pdf
    Last edited by Whoknows; 22 February 2016, 08:18.

    Leave a comment:


  • WordIsBond
    replied
    Just to quickly note, pension contributions made by your company are in addition to the 5% and certainly are deducted from profit / corporation tax liability. So you can still gain some tax efficiency even within IR35 by using this.

    Leave a comment:


  • DallasDad
    replied
    Golly isn't this complicated!

    Sue Ellen, point taken, the term PSC will surface no more, in future posts.

    Leave a comment:


  • VectraMan
    replied
    Originally posted by mudskipper View Post
    I think it's the opposite - anything not spent should be accounted for as profit - i.e. you will pay corp tax on it.
    That.

    Leave a comment:

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