IR35 and Corporation Tax

[MonkeysUncle]

I still don't understand the point of doing it this way, this is PAYE income, why not cut out all the admin and pay it straight into your personal bank account? If you put it through your Ltd Co you or more likely your accountant will still have to account for it at the end of the company tax year. You can just tell HMRC "ignore all this money going into my company account".

For the sake of saving £20/week/Dont want to use a brolly etc. Could be a number of reasons.

At the time I was with a brolly who were absolute tulip so scrapped them and just decided to do it this way rather then go sign up to another brolly.
I ended up leaving the contract a couple of months later so I didn't do it for long.

[MonkeysUncle]

A bit of a cluster fook really.
As been said all money from IR35 PAYE should have been paid to your personal bank account, not LTD.
Now your accountant must notify HMRC/fix the mess.

If not, you are looking at double taxation in either of:

1. Money to LTD, no salary = 20% corp tax.
2. Money to LTD, all salary to your LTD's PAYE = EE NIC+ER NIC+personal tax.

A) It doesnt have to be paid to personal. Its just easier.

B) To the OP you shouldn't need to pay Corp Tax provided your accountant has set it up up right as a deemed employment payment (i think you said they have).

[Hobosapien]

For the sake of saving £20/week/Dont want to use a brolly etc. Could be a number of reasons.

No need for brolly if agent is sorting out the PAYE and paying out net of taxes, as per OP's situation as described.

Shame OP didn't question the setup at the start not when Ltd company taxes being sorted out.

[Herts47]

What does your accountant say?

Waiting to hear back from him as I've asked the question

[Herts47]

What is it about the Future of Contracting subsection that lead you to post it here by the way?

I chose what I thought was the IR35 subsection so this is my error if I've ended up in the wrong place.

[Herts47]

Ooops.
If you haven't already got one you need an accountant, and one that understands the contractor market.

I've got an accountant but he's not familiar with IR35 - or wasn't until I had this contract. I'm sure he will know what to do though and I'm waiting for his reply.

[Herts47]

Due IR35 being applied to your income, the company will have made no profit as all income will have been paid out as salary. In spite of this, you will still need to file accounts to HMRC and Companies House along with a Corporation Tax return - the good news is that there should not be a Corporation tax liability due to there being no profit.

The accounts will be quite straight forward, but I would still suggest getting an accountant to do them (if you haven't done so already).

Hope this helps
Craig

Thanks for your help Craig. Yes, I have an accountant. I've had my Limited Company for 2 years so this is the 3rd year of accounts/corp tax coming up, but my first as being inside IR35

[northernladuk]

I've got an accountant but he's not familiar with IR35 - or wasn't until I had this contract. I'm sure he will know what to do though and I'm waiting for his reply.

I'd get a new one then really. Its pretty key for us.

[Herts47]

If you are inside IR35, why has the agency been paying into your Ltd Company Account? If you are inside IR35 and getting paid via PAYE this should be going straight into your personal account and not your company account. This is personal earned income with tax and NI deducted at source and should have nothing to do with your Ltd company.

You or your accountant will probably need to call HMRC and inform them of this mistake, HMRC won't know you've been paying PAYE into your company account and will just assume this is company earned funds and will be presenting you with a Corp Tax bill at the end of the year and try to tax you twice.

Also when you say you've "handled the VAT" have you paid VAT on these earnings? If so that is also incorrect, you don't charge or pay VAT on PAYE earnings.

It sounds like you've got yourself in a bit of a pickle by not understanding how the IR35 rules actually work. You should be able to sort it out but look forward to spending hours on the phone with HMRC to do it.

When I started this contract, I was told by the agency that I had to have my earnings paid into my Limited Company account. I had a battle in trying to get any understanding of how IR35 worked from them - and ended up doing my own research in the end. They told me I was not an employee but deducted PAYE and the payslip is in my name not my company - which technically makes me an employee. I didn't get paid holiday pay as "I wasn't an employee". I was told my employer would be my limited company. The VAT was added to my payslip as part of my earnings and I was sent an auto generated invoice.

So it's not me that has got myself into a pickle as you state. It's the agency not understanding the rules. They also taxed me far more than they should have as they didn't apply the correct cumulative code that HMRC sent them (found that out from HMRC the other day).

Hopefully my accountant will be able to resolve any issues with HMRC on the corporation tax, and he has submitted VAT returns in the normal way to them (and I've paid the VAT etc).

[Herts47]

This is possible....if your accountant can set it up correctly. I had this for a short while.
The agency took out employers NI etc and paid me the 'PAYE' amount into my LTD.
I use inniaccounts who have their own portal to manage your LTD (rather than freeagent). You set it up as a Public Sector IR35 contract. This way when the payment comes in it knows its not the full amount (as tax has been taken out) and puts this directly into your PAYE.

Its a bit more hassle but you dont end up paying brolly fee's so bit of saving.

For Ref (from Inniaccounts Website)
Receiving payments when inside IR35
With a contract with a public authority that is deemed inside IR35, the fee payer (either your agent or public authority if you contract direct) will calculate and deduct Income Tax and National Insurance from your invoice payments. These deductions are then reported and paid to HMRC on your behalf by the fee payer.

When setting up a public authority contract in inniAccounts that’s inside IR35, you’ll be able to identify it as such. This tells the software that you won’t receive full payment of invoices for that contract and that your company has no further PAYE Income Tax or National Insurance to pay. When you receive payment into your Business Bank Account and record invoices as paid in your Bookkeeping, a simple step will allow you to transfer the net payment of your invoice straight to your next payslip ready for payment.

Thank you and this is really helpful. Like you, the agency paid the employer NI and have submitted the PAYE to HMRC. My accountant should hopefully be able to sort out the null corporation tax