Keeping Company Running During IR35 Contract

[Guvernator]

With the impending changes coming up in April, more and more contracts are being offered as inside IR35. In the likely event that I will need to take an inside IR35 contract at some point, I'm thinking about what to do with the company. Ideally I want to keep it running in case I have a chance to take on outside IR35 contracts but obviously there would be some costs associated with doing that.

If I am working on an Inside contract paid direct to my personal account via an umbrella for instance, I realise I won't be able to claim day-to-day expenses like travel etc but would I still be able to put my company running expenses like accounting, business broadband line, business line phone bill and my wife's salary as secretary through the company as expenses using existing company funds built up over the years?

I realise while on an Inside role the company wouldn't be earning any revenue so I'd just be chipping away at the built up company funds but I just see that as a necessary expense to keeping the company running.

Is this even a good idea or should I be considering making the company dormant during inside IR35 contracts?

The other option could be to put the Inside IR35 earnings through the company but that just seems to complicate things as I'd need to keep the inside and outside earnings separate and accounted for properly which just seems like a recipe for getting into a mess.

[northernladuk]

Costs aren't exactly astronomical keeping a company while it's not trading. Accountants will often reduce their fees while it's not doing anything. You'd be best keeping your PI and IR35 insurances going for another full year though to cover historic issues. That's totally up to you and your risk profile though.

Are you sure you are understanding dormancy correctly? Many don't. It takes specific actions to make a company dormant and any activity will bring it out of this. Just leave the company not trading while you are inside.

Your wife's salary as secretary? Let's imagine for a moment she is actually doing something to earn it and it's not just a tax wheeze, what exactly will she be doing to earn it if the company isn't trading?

Broadband has long been a grey area as it's dual use in the house. Most accountants don't recommend claiming it as far as I am aware.

It used to be very uncommon for an agency to allow payments to a LTD. Usually it is PAYE or brolly. Craig at Clarity seems to think it's different so we will have to wait and see on that one.

[Andy Hallett]

If you think you are going to get outside gigs at some point it’s worth keeping it open.

As mentioned above costs are limited and you can release funds out in an efficient way.

[Paralytic]

I'd personally feel uncomfortable paying my wife a secretary/admin salary if I had moved to an inside or Umbrella gig. Check your accountant is happy to sign off your EOY accounts with that included.

Other stuff to keep the business ticking over (accountant fees, insurances etc), I'd be fine with. I've never billed home broadband to the company.

[northernladuk]

If you think you are going to get outside gigs at some point it’s worth keeping it open.

As mentioned above costs are limited and you can release funds out in an efficient way.

Jesus, that's a spooky coincidence. I've just pasted a quote from you about agencies asking about number of directors from five years ago in another thread, click on the next thread and you are there... Very surreal

[GhostofTarbera]

Go the whole hog and pay your wife dividends also, in for a tax wheeze penny in for a tax wheeze pound


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[ladymuck]

I only discovered last year that my accountant's fees are linked to my revenue (it's probably in the terms letter I signed but it's been a decade since I read that). Good to know for the future if everything goes Tango Uniform.

[Paralytic]

Go the whole hog and pay your wife dividends also, in for a tax wheeze penny in for a tax wheeze pound

Erm, there is absolutely no issue in paying a spouse (or any other shareholder) dividends whilst the company is not generating revenue, so long as there is enough retained profit to cover those dividends.

[SimonMac]

I have no accountancy fees, so since I went inside I have left the company running for things like company phone bill, insurance and other small subscriptions (plus the £6 a week home office use)

I hope to get an outside role at some point, once we are all back in offices I don't see how I can afford to stay inside, so keeping it open and "losing" money for me.

[northernladuk]

I have no accountancy fees, so since I went inside I have left the company running for things like company phone bill, insurance and other small subscriptions (plus the £6 a week home office use)

I hope to get an outside role at some point, once we are all back in offices I don't see how I can afford to stay inside, so keeping it open and "losing" money for me.

And that's how a contractor does it.