IR35 Exposure Calculator

[malvolio]

This is all hypothetical - of course I could draw it all as dividends now and then declare on my self assessment, but what would be the option post enquiry when it was deemed this money was earned inside IR35?

You would have a large tax bill...

IR35 is for the life of the contract that's been addressed, you can't break it down into smaller bits. All income for that contract, if found to be liable for IR35, will be deemed income.

[Cirrus]

£45k - basically 45% liability per year seems high.

You need to separate out the employer's NI otherwise it looks like you personally are paying the whole 45% whereas it's actually a combination of personal and corporate tax.

With regard to expenses, I believe the essential approach is you can factor out of 'earnings' anything that a permie could get tax free. Travel is always tricky because it's likely a lot of it could be regarded as commuting.

[meeko]

So using the HMRC Deemed payment calc, the tax owed is the difference between tax already paid and ERs NI + PAYE/EEs NI on deemed payment?

In this case for 2016/2017:

£102000 - 5 % = £96900
- £8100 (salary) = £88800

Employers NI on above = £10768
Deemed Payment = £88800 - £10768 = £78032
PAYE/NI due on £78032 = £25306.24

Tax due = £25306.24 + £10768 = £36074.24

[TheFaQQer]

So using the HMRC Deemed payment calc, the tax owed is the difference between tax already paid and ERs NI + PAYE/EEs NI on deemed payment?

In this case for 2016/2017:

£102000 - 5 % = £96900
- £8100 (salary) = £88800

Employers NI on above = £10768
Deemed Payment = £88800 - £10768 = £78032
PAYE/NI due on £78032 = £25306.24

Tax due = £25306.24 + £10768 = £36074.24

Not quite - that means that you haven't paid any tax or NI on the £8100 salary, so you need to add that back into the tax calculation.

Which takes you to about £43k plus your interest

[meeko]

There isn't any EErs NI or PAYE due on the £8100 as it's within the tax free income limit for that year? Looking at the HMRC examples for their calculator, they don't add the salary taken back onto the deemed payment.

This is very confusing!

[TheFaQQer]

There isn't any EErs NI or PAYE due on the £8100 as it's within the tax free income limit for that year? Looking at the HMRC examples for their calculator, they don't add the salary taken back onto the deemed payment.

This is very confusing!

If your salary is only £8100 then there's no NI or PAYE to pay. But your salary isn't £8100 - it's £8100 plus the deemed payment. Therefore you need to pay tax and National Insurance on all of your salary, not just some of it.

[meeko]

What you say makes sense, but the guide on HMRC's website doesn't do this?

https://www.gov.uk/hmrc-internal-man...manual/esm3145

[SueEllen]

What you say makes sense, but the guide on HMRC's website doesn't do this?

https://www.gov.uk/hmrc-internal-man...manual/esm3145

You are aware HMRC don't have the contractors? So nothing on their website makes sense.

Get some IR35 insurance, get your contracts reviewed and stop worrying about it.

[TheFaQQer]

What you say makes sense, but the guide on HMRC's website doesn't do this?

https://www.gov.uk/hmrc-internal-man...manual/esm3145

"any amount received by the worker from the intermediary in respect of which the worker is already chargeable to income tax as employment income and subject to Class 1 and/or Class 1A NICs in the year" - the £8100 isn't chargeable to income tax as employment income and is not subject to Class 1 and / or Class 1A NICs though.

[meeko]

You are aware HMRC don't have the contractors? So nothing on their website makes sense.

Get some IR35 insurance, get your contracts reviewed and stop worrying about it.

I've had my contracts and working practices reviewed, and the overall view was 'outside IR35' but this doesn't guarantee an 'outside' verdict from an enquiry. I've taken out insurance but I want to be sure the level of cover is sufficient for my liability hence trying to understand my exact liability.

"any amount received by the worker from the intermediary in respect of which the worker is already chargeable to income tax as employment income and subject to Class 1 and/or Class 1A NICs in the year" - the £8100 isn't chargeable to income tax as employment income and is not subject to Class 1 and / or Class 1A NICs though.

So are you saying it's not to be added to the deemed payment? It isn't in any of the examples HMRC give either, because it's taxed under normal rules for PAYE anyway?