IR35 Exposure Calculator

[meeko]

I've used nearly every IR35 calculator I can find, including asking my accountant and everyone gives a different figure. I'm trying to calculate my IR35 exposure were I to lose an IR35 enquiry. Calculations have varied from £80k to nearly £160k, not including fine and interest.

These are my figures which haven't changed much in the last 6 years.

Turnover £102k
Expenses:
Annual mileage of around 27500 miles (£8k)
Business Insurance £185
Telephone/Internet £200
Use of Home Office £216
Accountancy £1608
Salary £8160

I've retained a lot of profit, but I presume this isn't considered by HMRC, and they will look at the difference in tax I have paid in the last 6 years, compared to what I would've paid if inside IR35?

I'd be really grateful for advice on how to calculate the tax liabilty on the above figures if inside IR35.

[TheFaQQer]

£102k minus £8k salary = £94k

5% expenses deduction = £4700

Deemed salary = £89300

PAYE = £29k
Employees NI = £5k
Employers NI = £11k

Total payment due = £45k plus any interest and penalties

All figures are approximate and may or may not reflect reality

[pr1]

£102k minus £8k salary = £94k

5% expenses deduction = £4700

Deemed salary = £89300

PAYE = £29k
Employees NI = £5k
Employers NI = £11k

Total payment due = £45k plus any interest and penalties

All figures are approximate and may or may not reflect reality

times 6

[malvolio]

£102k minus £8k salary = £94k

5% expenses deduction = £4700

Deemed salary = £89300

PAYE = £29k
Employees NI = £5k
Employers NI = £11k

Total payment due = £45k plus any interest and penalties

All figures are approximate and may or may not reflect reality

There won't be any penalties, just interest. Also you can deduct the employment taxes already paid (PAYE, ErNICs, EeNICs) and recalculate CT outstanding. And take any claimed expenses back in as earned income. That will give a net figure that HMRC may demand in full, in part or not at all (all three have happened, apparently)


That's why there are no easy answers. Everyone's situation is different.

[meeko]

Many thanks for the calculation. Am I to assume the calculation will be largely valid for the last 6 years?

I've just found the HMRC IR35 Deemed Payment calculator but not entirely sure how to use it. They subtract the 5% allowance from gross turnover (not turnover-salary)?

On figures of £102k turover, 5% expenses and £8100 salary it shows:

Amount to be apportioned between deemed payment and employer's NICs: 88800
Employer's NICs on deemed payment: 10767
Deemed payment: 78033

I'm not sure what to do with these figures? I did read that IR35 liaility can be estimated as the employer's NICs on deemed payment which I presume is incorrect?

If I were to lose an enquiry and I have £100k retained profit, what would happen to that? Would I have to draw it all as salary?

[VectraMan]

£102k minus £8k salary = £94k

5% expenses deduction = £4700

It'd be 95% of the £102K= deemed salary of £96K, and then you'd have to work out the taxes on that as if it were gross salary (including NI), minus whatever you actually did pay (which was presumably not much). And it all counts in the tax year that it was earned, so whether you retained it or not is irrelevant.

If you'd been inside IR35 you could have avoided a lot of it by paying into a pension. But if you acted as if you were outside and later get caught, then you're screwed.

[TheFaQQer]

It'd be 95% of the £102K= deemed salary of £96K, and then you'd have to work out the taxes on that as if it were gross salary (including NI), minus whatever you actually did pay (which was presumably not much). And it all counts in the tax year that it was earned, so whether you retained it or not is irrelevant.

If you'd been inside IR35 you could have avoided a lot of it by paying into a pension. But if you acted as if you were outside and later get caught, then you're screwed.

Yes, you're right.

So £102k minus £5100 = £96900
Salary paid = £8160
(No other tax or NI paid already)

Employers NI = £10761

According to the HMRC calculator, which can be downloaded here.

[Cirrus]

and recalculate CT outstanding.

Is that true? I have this vague memory of someone saying you can't go back and re-run all the figures.

[malvolio]

Is that true? I have this vague memory of someone saying you can't go back and re-run all the figures.

Maybe, it's always been a bit grey. I suspect the paid CT (if any of course) will be reallocated to the PAYE fund so probably comes out as neutral.

But as I said, every case is different, it's impossible to give a generalised answer.

[meeko]

Thanks for all of your replies. Can anyone clarify if the expenses below are considered part of the 5%?

Business Insurance £185
Telephone/Internet £200
Use of Home Office £216
Accountancy £1608

Also, how does my annunal business mileage of around 27500 miles (£8k) get treated?

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