Reply to: IR35 any additional taxes to those deducted at source?

[northernladuk]

ha ok I believe you.

I guess I'm trying to work out why the client is so insistent on only engaging with ltd companies then. What is the point in them if the money is just deemed as our personal money.

We don't know. It's the first time we've seen this so your chance to be a trail blazer for the industry and find out for us.

[BlueSharp]

ha ok I believe you.

I guess I'm trying to work out why the client is so insistent on only engaging with ltd companies then. What is the point in them if the money is just deemed as our personal money.

It's odd they won't engage with a brolly as they would not have to manage the payroll. The Ltd could be as simple as trying to ensure you don't have workers rights which is a whole other kettle of fish. As others have said it's your money take it out and spend it but I would keep proof that it has been taxed at source. I would of thought them issuing an inside determination and telling you to manage your tax affairs accordingly would of been a more efficient route as they have pushed the liability on to you.


Out of interest how do you know the company are actually paying the PAYE tax, I assume you will still be issued with a pay slip by them or will the tax deduction be shown on some sort of remittance?

[jamesbrown]

ha ok I believe you.

I guess I'm trying to work out why the client is so insistent on only engaging with ltd companies then. What is the point in them if the money is just deemed as our personal money.

Most clients are not doing this, FWIW. You'll have to ask them why they decided to go this route. Ironically, it is the core route anticipated by the legislation, but most companies appear to be avoiding an IR35 determination altogether and requiring the use of umbrellas or converting people to FTCs (in order to avoid the risks that come with a determination), which was entirely predictable.

[Beko]

It isn't recorded as a profit and there is no CT to pay for the same reason because you extract that 40k without further tax due.

I'm not sure what else to tell you. You can choose not to believe us, but you won't get a different answer, I think. The ESMs will be back online soon and you can look at the accounting treatment yourself.

There is no double taxation in the sense you fear.

ha ok I believe you.

I guess I'm trying to work out why the client is so insistent on only engaging with ltd companies then. What is the point in them if the money is just deemed as our personal money.

[jamesbrown]

The company would invoice e.g. 52,000
The client deducts NI and income tax, meaning the company receives a payment of e.g 40,000
What happens to this money once it's in My Co Ltd' account is up to me. I have to get it out to pay myself. Either as salary or dividends.
The company still makes a profit, albeit a lower one than before.

It isn't recorded as a profit and there is no CT to pay for the same reason because you extract that 40k without further tax due.

I'm not sure what else to tell you. You can choose not to believe us, but you won't get a different answer, I think. The ESMs will be back online soon and you can look at the accounting treatment yourself.

There is no double taxation in the sense you fear.

[wattaj]

The company would invoice e.g. 52,000
The client deducts NI and income tax, meaning the company receives a payment of e.g 40,000
What happens to this money once it's in My Co Ltd' account is up to me. I have to get it out to pay myself. Either as salary or dividends.
The company still makes a profit, albeit a lower one than before.

It is not the company's money. It is now yours. Take it out and spend it on a book about the off-payroll rules.

[Beko]

Understood, but it is absolutely the case that you will pay no further tax. The mechanics are described in the ESMs, which have been yanked for unknown reasons, unfortunately, but your accountant will know how to handle this when the time comes. It is nothing more than an accounting problem.

Ok thank you.

[Beko]

If the company invoices 40k then the fee payer will deduct tax and NI from that 40k before it pays the money over if inside IR35. You no longer have the choice. The 40k is your salary.

The company would invoice e.g. 52,000
The client deducts NI and income tax, meaning the company receives a payment of e.g 40,000
What happens to this money once it's in My Co Ltd' account is up to me. I have to get it out to pay myself. Either as salary or dividends.
The company still makes a profit, albeit a lower one than before.

[KinooOrKinog]

Yes it will? If the company is paid e.g. £40,000 in fees and I take a £8600 salary, then, minus a few expenses, the rest is profit?

I know I could up my minimum wage salary payment to take the full £40,000 as salary but that was why I asked the question around additional taxes (specifically My Co Ltd having to now pay Employer's NI).

But jamesbrown thank you - sounds like you're saying that's not the case. I guess I just don't feel confident in it!

If the company invoices 40k then the fee payer will deduct tax and NI from that 40k before it pays the money over if inside IR35. You no longer have the choice. The 40k is your salary.

[jamesbrown]

But jamesbrown thank you - sounds like you're saying that's not the case. I guess I just don't feel confident in it!

Understood, but it is absolutely the case that you will pay no further tax. The mechanics are described in the ESMs, which have been yanked for unknown reasons, unfortunately, but your accountant will know how to handle this when the time comes. It is nothing more than an accounting problem.

[Beko]

You won't have to pay any CT because your company won't be making a profit. .

Yes it will? If the company is paid e.g. £40,000 in fees and I take a £8600 salary, then, minus a few expenses, the rest is profit?

I know I could up my minimum wage salary payment to take the full £40,000 as salary but that was why I asked the question around additional taxes (specifically My Co Ltd having to now pay Employer's NI).

But jamesbrown thank you - sounds like you're saying that's not the case. I guess I just don't feel confident in it!

[KinooOrKinog]

Gotta love how patronizing some people when they don't even understand themselves...

Does anyone have any insights re my additional tax question? Or, as it seems to be transpiring with most of this stuff, does no one really know for sure?

You won't have to pay any CT because your company won't be making a profit. The entire value of your contract will be taxed as income the same as an employee. It doesn't matter how you 'take' the cash. It's already been taxed before it gets to you.

[jamesbrown]

Gotta love how patronizing some people when they don't even understand themselves...

Does anyone have any insights re my additional tax question? Or, as it seems to be transpiring with most of this stuff, does no one really know for sure?

I think I posted what you want to know above? Your accountant can apply either a net or gross accounting treatment, but the end result for you is a salary and/or dividend payment from YourCo with no further tax.

[jamesbrown]

Every day is a school day!

But as this is only draft legislation, I assume it could change?

No, that can’t change. The whole point is that the client issues an SDS and the Fee Payer (could also be the client) deducts all applicable taxes (when inside). That is the central role of the Fee Payer. The yanked ESMs describe the accounting treatment for the PSC, but it’s just accounting. Obviously, it doesn’t make much sense to have a PSC under these circumstances and most clients won’t go this route anyway (rather, a direct or indirect employee), but that is the core of the legislation.

[Beko]

Gotta love how patronizing some people when they don't even understand themselves...

Does anyone have any insights re my additional tax question? Or, as it seems to be transpiring with most of this stuff, does no one really know for sure?