IR35 and leaving money in a company

[georgie]

Hello,

I'm looking at going freelance soon and I have a question based on this scenario:

Do I fall foul of any IR35 rules if earn say £100K through contracting, taking £43K as PAYE and leaving the other £57K in the company for a later date? Assuming all of that is within one tax year, starting from April '17.

I know the IR35 rules apply based on whether the permanent employee test applies, but I'm not sure whether this only applies if you try to withdraw money as dividends. I may in the future need some capital within my company if I want to expand it or equally may want to be able to pay myself £43K/year earning lots of money one year and less the next.

Thanks.

[Major Hassle]

Hello,

I'm looking at going freelance soon and I have a question based on this scenario:

Do I fall foul of any IR35 rules if earn say £100K through contracting, taking £43K as PAYE and leaving the other £57K in the company for a later date? Assuming all of that is within one tax year, starting from April '17.

I know the IR35 rules apply based on whether the permanent employee test applies, but I'm not sure whether this only applies if you try to withdraw money as dividends. I may in the future need some capital within my company if I want to expand it or equally may want to be able to pay myself £43K/year earning lots of money one year and less the next.

Thanks.

No. IR35 rules apply to the contract that exists between your Ltd and The Client and more importantly the working practices employed in the execution of the contract.

The monies received by you Ltd. can then be distributed as appropriate across one or many tax years, best discuss the most tax efficient method of distribution with your accountant.

[TheCyclingProgrammer]

All earnings received from an IR35 caught contract need to be paid as earnings either as you earn it via PAYE or at the end of the tax year as a deemed payment.

So if all your contracts are caught, you'll have no profit left to leave in the company.

[Jessica@WhiteFieldTax]

Good advice from Major Hassle & TCP

All earnings received from an IR35 caught contract need to be paid as earnings either as you earn it via PAYE or at the end of the tax year as a deemed payment.

So if all your contracts are caught, you'll have no profit left to leave in the company.

Personally, if the contract is self declared as inside IR35, I think taking 95% as PAYE rather than faffing around with deemed payments is a lot easier. Others views may differ.

[VectraMan]

Personally, if the contract is self declared as inside IR35, I think taking 95% as PAYE rather than faffing around with deemed payments is a lot easier. Others views may differ.

WSS. I just make sure salary + employers NI + pension >= 95%.

I think one of the worst things about IR35 is that you can't act like a business; i.e. can't plan ahead, exactly as the OP wants to do.