IR35 & Ltd Company Accounting Year

[sco]

Hi

I have read that for Ltd companies with contracts within IR35 then an accounting reference date of 5th April is preferable. If anyone has direct experience of this scenario I just wanted to check that this was still the received wisdom?

On the 5th April reference date, my assumption would be:
- IR35 deemed payment would be based on any receipts up to 5th April (e.g. typically up to a Feb invoice).
- anything invoiced but not received (e.g. for March) would fall into the next year's IR35 deemed payment, but would still accrue in the current period in terms of the company accounts

Many thanks in advance -

[northernladuk]

Can I ask what makes you think this is deemed best practice if you are inside IR35?

[malvolio]

Hi

I have read that for Ltd companies with contracts within IR35 then an accounting reference date of 5th April is preferable. If anyone has direct experience of this scenario I just wanted to check that this was still the received wisdom?

On the 5th April reference date, my assumption would be:
- IR35 deemed payment would be based on any receipts up to 5th April (e.g. typically up to a Feb invoice).
- anything invoiced but not received (e.g. for March) would fall into the next year's IR35 deemed payment, but would still accrue in the current period in terms of the company accounts

Many thanks in advance -

Jeez....

1. Not everything is about IR35.

2. You should be using cash accounting, not accrual accounting.

3. The IR35 deemed payment calculation is due at company year end. We're not in business to make HMRC's life easy.

4. You probably aren't caught by IR35 anyway. 99.4% of cases that have been challenged to date have been found outside.

5a. What does your accountant say? Yes, a cliché, but if he isn't giving you correct advice, he is costing you lots of money. That's not what you pay him for - or

5b. Why do you not have an expert accountant?


HTH. We live in hope.

[Sockpuppet]

The only reason for suggesting a 5th April accounting date is that it will fit in with the personal tax year.

[malvolio]

The only reason for suggesting a 5th April accounting date is that it will fit in with the personal tax year.

That's the personal tax year, it has no bearing on the company one. You only have to know how much the company invoiced in the previous 12 months, if the OP really wants to decide that you're caught for a tax that he probably isn't.

[Greg@CapitalCity]

A slight benefit in that your expenses for your accounts will tie in with your expenses in the IR35 calculation. As you mention, IR35 is calculated on a cash basis, and your accounts are done on an accrual basis, so the turnover in the your accounts will often not match that used for you IR35 calculation.

[sco]

Thanks for the assistance everyone, it doesn't sound like any particular company accounting year is essential in this scenario... appreciate your guidance

[Sockpuppet]

That's the personal tax year, it has no bearing on the company one. You only have to know how much the company invoiced in the previous 12 months, if the OP really wants to decide that you're caught for a tax that he probably isn't.

No but if you are caught mind be (slightly) easier to work out.

[simondolan]

Hi

I have read that for Ltd companies with contracts within IR35 then an accounting reference date of 5th April is preferable. If anyone has direct experience of this scenario I just wanted to check that this was still the received wisdom?

On the 5th April reference date, my assumption would be:
- IR35 deemed payment would be based on any receipts up to 5th April (e.g. typically up to a Feb invoice).
- anything invoiced but not received (e.g. for March) would fall into the next year's IR35 deemed payment, but would still accrue in the current period in terms of the company accounts

Many thanks in advance -

For inside IR35 its marginally easier to do the sums with a 5th April year end - that's all.