IR35-caught deemed payment

**MPwannadecentincome** · 12 February 2009, 14:41

Originally posted by expat View Post

Imagine I am inside IR35. We come towards the end of the tax year 2008/09. For the work I have done in February, I invoice in March. It will not be paid until April i.e. in tax year 2009/10.

However, the amount of this invoice will form part of the "deemed payment", so I have to pay PAYE+NIC on it for tax year 2008/09. But I don't have the money yet.

Worse, when I then pay out some of that money in salary, it is by now 2009/10 and I have to pay actual PAYE+NIC on it.

Am I getting this wrong? What is the answer?

Invoice after 5th April 2009.

**expat** · 12 February 2009, 14:43

Originally posted by MPwannadecentincome View Post

Invoice after 5th April 2009.

I did think of that. AIUI since the work is already completed in Feb 2009 it has to be accounted for then and not held on to into the next tax year. Or is this an accounting aspect, different from tax aspect?

Not to mention that I don't really want to wait for the money

**deckster** · 12 February 2009, 15:46

Have you asked your accountant?

**expat** · 12 February 2009, 16:00

Originally posted by deckster View Post

Have you asked your accountant?

Not yet. Obviously I will, but I'd be surprised if nobody has been there before.

But as I say there may be a simple answer, such as the important date for this calculation being date invoice paid, not date raised, or date work done, as in accounts. That would solve it.

**sage@reillymcmordie** · 12 February 2009, 16:09

IR35 - caught deemed payment

No!

The deemed schedule E payment is:

Total income from client X
less 5% of TIFC (X)
less salary actually paid and benefits provided (X)

Excess Amount Y

The total income from client is effectively cash received.
It is not based on work done.
(Sch 12, Para 10(5)A FA 2000)

**QwertyBerty** · 12 February 2009, 16:30

I believe the tax point for PAYE is the date the payment is made to you as stated on the pay slip. So if you get paid for Feb's work after 05 April 2009 then the income is against the tax year 2009/10.

Just as an aside, for CT purposes it's when the work was done that counts.

QB.

**expat** · 12 February 2009, 16:39

Originally posted by QwertyBerty View Post

I believe the tax point for PAYE is the date the payment is made to you as stated on the pay slip. So if you get paid for Feb's work after 05 April 2009 then the income is against the tax year 2009/10.

Just as an aside, for CT purposes it's when the work was done that counts.

QB.

Yes, I know that, that is exactly the problem: if my Ltd Co "gets paid" (is that invoice date?) before 05 April 2009 but I get paid by my Ltd Co after 05 April 2009 then I pay tax twice.

1. invoice dated Feb 2009. Income to Ltd Co in 2008/09. Deemed payment therefore in 2008/09. Tax due on deemed payment 2008/09.

2. salary dated Apr 2009 (> 5th). Salary in 2009/10. Tax due on salary in 2009/10.

Problem: tax due twice.

**QwertyBerty** · 13 February 2009, 09:09

http://www.hmrc.gov.uk/leaflets/calc_deempyt.htm#3

Q. What if the money is paid to me as a salary after the end of the tax year, rather than as dividends?

A. Any money paid as salary will be subject to the normal PAYE and NICs rules, whenever that salary is paid. Any salary paid in a later year will reduce the amount of the deemed payment in the tax year in which it is paid.

If your company pays you a salary after the end of a tax year in which you have paid tax and NICs on a deemed payment, and your salary in the later year is more than the amount your company receives from engagements covered by the legislation, after deductions, then you may pay more tax and NICs than you need. You should seek advice from your professional adviser if you think this situation applies to you.

**expat** · 13 February 2009, 09:13

Originally posted by QwertyBerty View Post

http://www.hmrc.gov.uk/leaflets/calc_deempyt.htm#3

Q. What if the money is paid to me as a salary after the end of the tax year, rather than as dividends?

A. Any money paid as salary will be subject to the normal PAYE and NICs rules, whenever that salary is paid. Any salary paid in a later year will reduce the amount of the deemed payment in the tax year in which it is paid.

If your company pays you a salary after the end of a tax year in which you have paid tax and NICs on a deemed payment, and your salary in the later year is more than the amount your company receives from engagements covered by the legislation, after deductions, then you may pay more tax and NICs than you need. You should seek advice from your professional adviser if you think this situation applies to you.

That is exactly the problem that I am referring to. What I am looking for is a solution.

IR35-caught deemed payment