Inside IR35 and not taking all profit as salary

[malvolio]

Where I operate there is no tax relief on dividend income, so all income comes out as salary (after expenses, naturally). My accountant calculates the bonus payment to miminize profit (and thus company tax). The bonus amount is recorded as a loan against my employment account, and reduced when I actually pay the bonus. ( Usually, for cash flow reasons, some six months later ).

This seems in accord with what people have said above.

So, this year, say I've 20'000 profit. That 20'000 is recorded as a loan from my employment account. The ee/ernic gets accounted for on 31.12.2008, paid by the company a few months later. The 20'000 (less eenic) will be paid in 2009, and clear the loan I've made to the company. The income tax, however, is not due until the bonus is actually paid to me.

UK law may well differ on when the ee/ernic and income tax are due, and to which year they apply.

Whoa, am I missing somehting here? If your company accounts are legitmately not subject to UK taxation law, why are you worried about IR35?

Otherwise what has been said above is broadly correct. If IR35 applies to one of your contracts only, you owe PAYE/NICs on 95% of that gross income. Nothing stops you offsetting that against your CT/ salary/dividends payments for the year based on your gross income for all your contracts, as long as that amount of tax is paid over to HMRC.

[Bumfluff]

I was told in the end by an accountant (still waiting for mine to get back to me ), that I can delare the bonus for my financial year just gone but not pay it till after the financial year, this is as long as the tax and NI are paid on the bonus within the 9 months after the end my ltd financial year, so it avoids me paying CT on the bonus, I just take the bonus minus a full hit of employer, employee NI and tax.

[NotAllThere]

Whoa, am I missing somehting here? If your company accounts are legitmately not subject to UK taxation law, why are you worried about IR35?

I have no worries about IR35.

You're missing the bit "Where I operate there is no tax relief on dividend income" I can take dividends, but I don't get a nice tax credit, so I'd end up paying corp tax, and tax on the dividends. So it isn't worth it.

[malvolio]

D'oh! The result of doing three things at one - I'm mixing up two separate posters!! Hey, it's been a long day...

[ASB]

I was told in the end by an accountant (still waiting for mine to get back to me ), that I can delare the bonus for my financial year just gone but not pay it till after the financial year, this is as long as the tax and NI are paid on the bonus within the 9 months after the end my ltd financial year, so it avoids me paying CT on the bonus, I just take the bonus minus a full hit of employer, employee NI and tax.

There are some specific rules about this. Essentially you declare the bonus but don't pay it. I beleive - but am not entirely sure - that you also need to declare a liability for the TAX and NI that is expected to be paid, thus you need to do the total sums. What I am unsure about is whether the [forward] tax and ni on the bonus can be accounted for as a deduction in the current year.