Can PSC use ir35 revenue on other projects before deeming my salary?

[forumuser]

Say I had a inside ir35 contract (private sector, post April) worth 100k, and I wanted my PSC to use 80k of that received revenue first on a separate project expense (eg paying a dev to make a new app I hoped would be successful) leaving 20k available to pay me as a PAYE salary, with tax and NI on the 20k, would that be allowable? Or would my ability to be entrepreneural and grow the company be greatly diminished if the revenue is earned through inside ir35 vs outside? Surely a business is there to be grown?

[vwdan]

Say I had a inside ir35 contract (private sector, post April) worth 100k, and I wanted my PSC to use 80k of that received revenue first on a separate project expense (eg paying a dev to make a new app I hoped would be successful) leaving 20k available to pay me as a PAYE salary, with tax and NI on the 20k, would that be allowable?

ALL income through an IR35 contract has to be treated as salary. You're essentially asking "If I take a job, can I take some of the money tax free to pay somebody to paint my house?"

Or would my ability to be entrepreneural and grow the company be greatly diminished if the revenue is earned through inside ir35 vs outside?

Very muchso - why do you think we're all so angry?

Surely a business is there to be grown?

The official HMRC/HM Gov response to that is that you are not, in real terms, "in business", are not an entrepreneur and your company only exists as a tax dodge.

Welcome to the Party of Business (The Party Of Business | Vote Conservative) enjoy your stay.

[cojak]

Inside IR35 isn’t a business. It’s an employee <> employer relationship only.

If you use a PSC, the agency would deduct the taxes first. That’s why your income is a salary.

[forumuser]

Inside IR35 isn’t a business. It’s an employee <> employer relationship only.

If you use a PSC, the agency would deduct the taxes first. That’s why your income is a salary.

So after agency deducts taxes, remainder is paid to the Ltd, does it belong to the Ltd or me? And if say 60k is left after taxes, and I use 30k paying other projects, what is my salary?

[northernladuk]

So after agency deducts taxes, remainder is paid to the Ltd, does it belong to the Ltd or me? And if say 60k is left after taxes, and I use 30k paying other projects, what is my salary?

The won't pay it to the Ltd. They pay it to you directly if you are on PAYE or via an umbrella. There is no need to pay the Ltd.

It's highly unlikely they will allow you to use the Ltd. Your options are paye or umbrella.

[GhostofTarbera]

So after agency deducts taxes, remainder is paid to the Ltd, does it belong to the Ltd or me? And if say 60k is left after taxes, and I use 30k paying other projects, what is my salary?

Then for the icing on the top, Any expenses (hotels/flights/travel/accountant fee) comes out of your net wages


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[economicpygmy]

So after agency deducts taxes, remainder is paid to the Ltd, does it belong to the Ltd or me? And if say 60k is left after taxes, and I use 30k paying other projects, what is my salary?

You can put it through a limited company but why bother, inside is you as an employee with all the benefits that brings.
There was a Ltd company 5% expenditure allowance which is being removed April 2020.

[eek]

The money you receive is your salary and you have to extract it from your company either as PAYE (with tax deducted) or into a pension.

If you were planning to create software and grow a business the time to do it was a while ago. Now you will have to treat it as a different business and invest your taxed income into it.

[WordIsBond]

Say I had a inside ir35 contract (private sector, post April) worth 100k, and I wanted my PSC to use 80k of that received revenue first on a separate project expense (eg paying a dev to make a new app I hoped would be successful) leaving 20k available to pay me as a PAYE salary, with tax and NI on the 20k, would that be allowable? Or would my ability to be entrepreneural and grow the company be greatly diminished if the revenue is earned through inside ir35 vs outside? Surely a business is there to be grown?

That's part of the 'magic' of the 'reform'.

Before the 'reform', if you'd done that and said you were inside, if HMRC came calling and you ended up in a tribunal, you could have said, 'Obviously I'm in business for myself, not an employee. I didn't even take that money out, my company used it to hire someone else and develop a product.' It wouldn't have guaranteed you'd win, but it would be a strong argument and unless you had been really stupid re: IR35, you'd have won your case.

With the 'reform' you don't even get to make the argument. The client decides, your tax fate is sealed. If the client decides 'wrong', HMRC will sort them out in a year or two.

If you want to build a business, you either have to find a large client that will work with you on a B2B relationship or find a small client, so you still get to make the determination.

Either that or work as an employee (real or de facto) and start your business out of personal funds and build it up that way. But that will also obviously be slower and more painful.