Inside IR35 and keeping company going - carrying forward losses?

[psychocandy]

Recent legislation changes have got a lot to answer for.....

Ok, so if you're in an inside IR35 PS gig then ALL of your contract income gets taxed. As per my other thread, it seems you have two options:-

1. Umbrella. In which case, you are no longer an employee of you limited.
2. Staying with ltd but getting someone else (or agency) to deduct tax.

Either way there is nothing to pay the company costs with. Accountant has advised me if you are no longer employed by your own ltd then pretty much you have to limit expenses.

Either way, ltd is going to make a loss. Apparently, you can take this loss forward to offset future profits but also there is option to offset against past profits. How on earth does that work if the CT is already paid?

e.g.
To May 2017 limited makes - £100K profit.
May 2017 - May 2018 - £5K loss.

Also, does being employed by ltd (During may 2017 - may 2018) rather than umbrella make a difference?

I guess if you're employed by ltd you can still buy things for the company whereas if the person is umbrella employee then it needs to be minimised? So I guess childcare could still be paid for (albeit making ltds loss even more). Pension as well maybe? (although since you're losing the NI salary sacrifice gain its probably the same as paying personally).

Of course, "some" umbrellas do childcare vouchers but not all. Same with pension,

[northernladuk]

A) Shouldn't this be in the PS section.
B) What are you actually asking?
C) Why aren't you asking your accountant to explain it to you 3 or 4 times, with pictures and big writing?

[Hobosapien]

Technically this is not PS related as one can be inside IR35 via a brolly while in the private sector.

To reclaim losses offset against previous year(s) profit you can request a corp tax repayment when filing the annual company tax return.

[TheFaQQer]

Technically this is not PS related as one can be inside IR35 via a brolly while in the private sector.

To reclaim losses offset against previous year(s) profit you can request a corp tax repayment when filing the annual company tax return.

Outside of PS you get have the 5% that you can take off for expenses, which means that you can still make some profit. Inside PS, you don't get that at all so everything must be run at a loss.

[Hobosapien]

Technically expenses aren't profit as they are deducted from turnover before calculating profit, so should still all cancel out if the expenses are legit.

[VectraMan]

1. Umbrella. In which case, you are no longer an employee of you limited.
2. Staying with ltd but getting someone else (or agency) to deduct tax.

I can't see how you can't be the employee of the agency if the agency are deducting tax for you. By "employee" I mean from a tax point of view; you could still technically be an "employee" of your company from a rights and insurance point of view, just not registered for PAYE. If the agency are deducting the tax and paying YourCo. the net, then that money is already your money (as it's already taxed) and not the company's money - i.e. add it to your Director's Loan account.

Probably. What a mess.

Either way there is nothing to pay the company costs with. Accountant has advised me if you are no longer employed by your own ltd then pretty much you have to limit expenses.

Why aren't you limiting expenses anyway?

As you say: Yourco. will make a loss, but you can get a CT refund / offset it against future profits. Also you could go into the red now with pension or anything else payments assuming that you're going to be outside IR35 in future. That possibly works out better than making personal contributions.

[TheFaQQer]

I can't see how you can't be the employee of the agency if the agency are deducting tax for you. By "employee" I mean from a tax point of view; you could still technically be an "employee" of your company from a rights and insurance point of view, just not registered for PAYE.

You can be, and some agencies will offer that.

But I would expect that some agencies won't want to get involved with calculating the tax and NI for the contractor, deducting that and paying it over to HMRC - to be honest, I expect that many agencies wouldn't have the system to be able to do that even if they wanted to take that risk. It's much easier for the agency to force the contractor into an umbrella (especially if they get a commission payment) and it removes any risk from the agency.

[Cirrus]

Technically expenses aren't profit as they are deducted from turnover before calculating profit, so should still all cancel out if the expenses are legit.

They couldn't possibly be 'legit' if they are connected with a contract through an umbrella. You can only count expenses related to the relevant business not to other businesses that happen to be connected to you.

If your company is idle for a year or so I can't see why you can't make a loss eg on accounting, office expenses etc but the Revenue don't like non-trading entities so you couldn't carry on doing it for too long.

[VectraMan]

If your company is idle for a year or so I can't see why you can't make a loss eg on accounting, office expenses etc but the Revenue don't like non-trading entities so you couldn't carry on doing it for too long.

If your company is idle for a year you will make a loss. It's not something you can or can not do; it's something that is.

I kept my company going for a couple of years of Permiedom and nobody seemed to mind.

[ASB]

It is possible to carry back losses and potentially get a refund of previously paid ct.

https://www.gov.uk/guidance/corporat...laiming-a-loss