IR35 / Directors loan

[mitschelUK]

Hi there,

some background - I'm contracting though my Ltd. company. I work since the beginning within IR35 (IT consultancy) as I've worked for my current client in a permanent employment contract before.

Due to IR35 I know that I need to pay myself 95% of the companies income as PAYE whilst 5% will be the allowance for everything else - expenditures and purchases and such.

However, I'm unsure if I'm still "allowed" to pay myself a directors loan whilst within the above contract.

Theoretically - instead paying myself a 12k gross salary for November, I like to reduce this to 2k and pay myself 10k as a directors loan (which I also like to offset in the next personal tax year). Is something like this possible? Or can I not count the current income as positive company income as I'm obligated to PAYE it?

Many thanks!

[northernladuk]

Just out of mild curiosity... What saving would you think you are getting even if this was possible?

[WTFH]

What has your accountant advised you to do?

[TheFaQQer]

Due to IR35 I know that I need to pay myself 95% of the companies income as PAYE whilst 5% will be the allowance for everything else - expenditures and purchases and such.

However, I'm unsure if I'm still "allowed" to pay myself a directors loan whilst within the above contract.

Theoretically - instead paying myself a 12k gross salary for November, I like to reduce this to 2k and pay myself 10k as a directors loan (which I also like to offset in the next personal tax year). Is something like this possible? Or can I not count the current income as positive company income as I'm obligated to PAYE it?

You are paying NI and PAYE on 95% of the contract. You could loan yourself money out of the 5% as well if you wanted to, but I'm not sure what benefit that would have for you personally, and you'll still have to repay it at some point.

[mitschelUK]

Well, I like to slightly reduce my gross salary for this personal tax year and wanted to push it into the next one.

So for e.g. 110000 company income (for 17/18) (the 95%) I like to take 10k as loan (from the 95% as well) to reduce the forecasted annual gross to 100k to avoid losing the half of the personal allowance. Than I like to repay the loan in April and PAYE as normal the whole income.

[TheFaQQer]

Well, I like to slightly reduce my gross salary for this personal tax year and wanted to push it into the next one.

So for e.g. 110000 company income (for 17/18) (the 95%) I like to take 10k as loan (from the 95% as well) to reduce the forecasted annual gross to 100k to avoid losing the half of the personal allowance. Than I like to repay the loan in April and PAYE as normal the whole income.

As you said in the first post, you have to declare 95% as income.

[TheCyclingProgrammer]

Any money earned from a caught contract not paid to you by PAYE in a given tax year will result in a deemed payment being due, so others have said it won’t work.

[LondonManc]

As you said in the first post, you have to declare 95% as income.

This - if you're inside IR35, you're down the PAYE route.

You might want to check that the 95% rule is still in play - Lucy, can you confirm?

[TheFaQQer]

This - if you're inside IR35, you're down the PAYE route.

You might want to check that the 95% rule is still in play - Lucy, can you confirm?

95% is in play unless public sector. You don't have to call me Lucy though.

[LondonManc]

95% is in play unless public sector. You don't have to call me Lucy though.

I bet you've been called worse.