Inside IR35 - no dividend payments at all?

[Whoknows]

So wait until Monday, see what they say and then ask us (us being fellow contractors not accountants) and see if our random advice ties up with your professional advice.

Back to the original theme of this thread........accountant has come back to me and advised that:

1. Yes, the 5% expenses allowance would be considered company profit if not spent, and could be drawn as a dividend
2. The gain from the VAT FRS (6.5% in my case) IS considered IR35 revenue and so is not removed from the VAT Exclusive turnover figure, used for the deemed payment calculation.

So the first one is cleared up, but today I've had different stories from multiple accountants on item 2.

[Qdos Contractor]

Back to the original theme of this thread........accountant has come back to me and advised that:

1. Yes, the 5% expenses allowance would be considered company profit if not spent, and could be drawn as a dividend
2. The gain from the VAT FRS (6.5% in my case) IS considered IR35 revenue and so is not removed from the VAT Exclusive turnover figure, used for the deemed payment calculation.

So the first one is cleared up, but today I've had different stories from multiple accountants on item 2.

It’s a confusing one, not helped by HMRC’s vague guidance. Someone linked to BIM31585 earlier where they - rather confusingly - state that the figures to be used should be ‘VAT exclusive’. Unfortunately they mean excluding the VAT actually payable, not simply entering the original net amounts invoiced. There is another (very old) page here which is a little clearer on the issue.

You gave the example on page 2 based on net sales of £104k with a FRS rate of 13.5%. The amount you would have to enter in ‘step 1’ of the deemed payment calculation would be £112,450 not £104k, so the FRS ‘gain’ is therefore rolled into the overall deemed payment calculation.

So your current accountant is correct, which is hopefully gives some consolation.

[Whoknows]

Great thanks, finally some clarity!

[VectraMan]

Thanks QDOS. IR35 is slightly worse than I thought.

Another related issue is that the new online CT600 replacement (accounts and corporation tax) asks for "Turnover" and explicitly says "excluding VAT". I googled and some people said that should include the FRS gain, and others saying the FRS gain should be part of "other income". Presumably that's the same and "excluding VAT" means including the FRS gain.

[Qdos Contractor]

Presumably that's the same and "excluding VAT" means including the FRS gain.

Correct.

[northernladuk]

They know already, only people with an agenda would deny this, (sellers of IR35 products) and HMRC forum plants (NLUK)

Unix has gone quiet.....

[LisaContractorUmbrella]

They know already, only people with an agenda would deny this, (sellers of IR35 products) and HMRC forum plants (NLUK)

[Unix]

Unix has gone quiet.....

I have changed my views, IR35 is real and every contractor should do everything in their power to protect themselves from it. That's why i'm launching my own IR35 insurance company. For only £100 a month you don't need to worry again, cash only.

[northernladuk]

Some people just won't be told whatever evidence you give them :

[northernladuk]

Not sure if this is as bad as being called an agent not so long ago or not