Reply to: IR35-caught deemed payment

[sage@reillymcmordie]

IR35 - caught deemed payment

- well yes - if you wish to defer payment of tax. obviously you have to meet that tax liability in 2010

[expat]

The deemed Schedule E calculation has nothing to do with the calculation of corporation tax or calculating nornal payroll. It is based on cash received in each and every fiscal year.

Right. So AIUI I just have to make sure that MyCo Ltd doesn't receive money in 2008/09 and not pay it out till 2009/10.

[sage@reillymcmordie]

IR35 - caught deemed payment

The deemed Schedule E calculation has nothing to do with the calculation of corporation tax or calculating nornal payroll. It is based on cash received in each and every fiscal year.

[Robot]

Just a thought ...

Work done in Feb 09, Company year-end is March 09, you are paid for the work done in Feb 09 in April 09.

Accounts to March 09 will include Feb 09 invoice.

Reduce profit in accounts to March 09, by accruing a salary bonus in the accounts, Feb sales invoice, less: 5%, other expenses = Gross salary + NIC

Pay the salary bonus in April 09 or within nine months of 31 March 09 :-)

Income in the right year, IR35 Salary will be paid in correct tax year 2009/10.

This would get round paying CT and PAYE/NIC on the same funds ...

As I say just a thought.

Robot

PS Incidentally, the Feb 09 invoice would not go on the deemed payment for 2008/09, as the Deemed payment is calculated purely on cash received basis, not an invoice basis.

[expat]

For the deemed payment calculation HMRC use the phrase
"payments and benefits received".

I would imagine this means when your company gets paid, not when you invoice for it. So if you're paid in April then it'll be for tax year 2009/10.

Yes, I didn't know that at first but I've been starting to get that impression (i.e. not the same as accounting rules). That doesn't eliminate the problem but it does narrow the window to a manageable size.

[krytonsheep]

For the deemed payment calculation HMRC use the phrase
"payments and benefits received".

I would imagine this means when your company gets paid, not when you invoice for it. So if you're paid in April then it'll be for tax year 2009/10.

[expat]

Well, the only "solution" then is
a) don't have inside-IR35 contracts
b) lie to HMRC

2 well-established lines of action

I believe that I am in the first, and I do not do the second. But I did just want to inquire, because it seems to me that, if inside IR35, one is liable to pay tax twice, and this is an iniquity. Not just a difference of political view on tax and IR35, but actually wrong.

[QwertyBerty]

Well, the only "solution" then is
a) don't have inside-IR35 contracts
b) lie to HMRC

[expat]

Basically it means you must pay tax twice now and offset that salary against next year's deemed salary in 12 months time.

QB.

Tax twice "now": i.e. once at the end of 2008/09 as deemed payment, again at the start of 2009/10 as PAYE on actual salary. Twice!

Then indeed the actual salary in 2009/10 will count against any deemed payment in 2009/10, but that does NOT get me out of paying tax twice. I suppose if you do that every year, it will roll over so you will only pay 2x tax once. But that's too much.

With respect you are not telling me anything I don't already know. Basically you are repeating the question as if it were an answer.

Problem: I might have to pay tax twice.
Solution: (not found yet).

[QwertyBerty]

Basically it means you must pay tax twice now and offset that salary against next year's deemed salary in 12 months time.

QB.

[expat]

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.

[QwertyBerty]

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]

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]

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.

[sage@reillymcmordie]

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)